Digene reports fiscal 1996 year end and fourth quarter financial results.

BELTSVILLE, Md.--(BUSINESS WIRE)--Sept. 17, 1996--Digene Corp. (NASDAQ:DIGE) today reported operating results for the fourth quarter and fiscal year ending June 30, 1996.

Total revenues for the year ended June 30, 1996, rose 9.4% to a record $6.7 million, versus the $6.2 million reported for last year. Revenues from product sales rose 17.5% to $6.4 million from $5.4 million in 1995. Revenues from Hybrid Capture products increased $76.5% from $2.6 million to $4.5 million. Total revenues for HPV testing products increased 27.4% from $2.2 million to $2.8 million in 1996. Gross margins on product sales for the year were 54.5% compared with a gross margin of 51.0% in the year ending June 30, 1995. The net loss for the year was $2.6 million, or $1.30 per share, versus a loss of $1.5 million, or $1.78 per share in the prior year. Cash, cash equivalents and short-term investments were $28.6 million at June 30, 1996 compared with $1.2 million at the end of fiscal 1995. In June 1996 the company repaid in full its long-term debt obligation of $2.6 million to Life Technologies Inc.

In May 1996, Digene successfully completed an initial public offering of 3,000,000 shares of its common stock for net proceeds of approximately $30.7 million which will enable the company to continue to develop its core business and implement its strategic sales and marketing programs. Total revenues for the 1996 fourth quarter increased 16.0% to a record $2 million, compared to the $1.7 million reported for the fourth quarter of the prior year. Product revenues increased 21.2% from $1.6 million in the fourth quarter of 1995 to $1.9 million in the last quarter of 1996. Gross margins on product sales for the quarter were 59.8% compared with gross margins of 48.2% in the quarter ending June 30, 1995. The net loss for the quarter was $0.9 million, compared with a loss of $0.6 million reported for the fourth quarter of the prior year.

Evan Jones, President and Chief Executive Officer commented, "We are extremely proud of our progress during fiscal 1996 following FDA approval of our HPV DNA test. During the 1996 fourth quarter, the American Society of Colposopy and Cervical Pathology issued clinical practice guidelines allowing for the use of HPV DNA testing in the follow-up of women with equivocal or inconclusive Pap smear results. Additionally, in June 1996, the World Health Organization (WHO) issued a statement that HPV DNA testing can complement and improve the cytological detection of cervical disease, especially in patients with equivocal pap-smear results. The WHO statement indicated that HPV DNA testing has been shown to be an effective tool in determining the need for referrals for women with equivocal Pap smear results to colposopy. In addition, we achieved several key milestones during 1996 which included the initial marketing roll out of our HPV test, the acceptance of the test by substantially all major clinical reference laboratories throughout the United States and the validation of the clinical utility of the HPV test in clinical research articles."

"Going forward, Digene's marketing programs, the cornerstone of our penetration strategy, will focus on educating the marketplace as to the clinical and economic benefits of the HPV test as both a test for equivocal pap smears in the United States, and as a primary screening tool internationally. We continued to grow in the Central European market where we have been able to gain reimbursement for our test. The creation of Digene Brazil and our cervical cancer screening network there has positioned Digene to become a leader in cervical cancer screening in Brazil. The Brazilian market is key to our South American strategy because of the size of the market - a population of 160 million people - and because we have been able to obtain reimbursement for our test in Brazil. We anticipate establishing additional relationships in South America during this fiscal year."

Jones concluded, "In fiscal 1997, Digene is committed to developing HPV testing in both the United States and internationally by increasing our own direct sales and marketing efforts, as well as pursuing strategic alliances to increase market acceptance. Further, we anticipate the completion of a clinical trial being conducted by Kaiser Permanente designed to test the clinical utility and cost effectiveness of the HPV test in a managed care setting. Finally, we are completing clinical trials for our Hybrid Capture CMV DNA test. The CMV test is expected to provide clinicians with an accurate and timely means of diagnosing and monitoring Cytomegalovirus (CMV) infection. Active CMV causes blindness in AIDS patients and is a major cause of infection and mortality in organ transplant recipients. Moreover, the CMV test reflects our long-term strategy of leveraging and expanding our core Hybrid Capture DNA technology for additional disease management classes. We anticipate filing for 510(k) approval for our CMV DNA test by year end."

Digene Corp. develops, manufactures and markets DNA testing systems for the screening, monitoring and diagnosis of human diseases. The company's products are designed to help improve clinical outcomes and reduce the overall cost of disease management. Digene's lead product, the Hybrid Capture HPV DNA test, detects the presence of HPV, the primary cause of cervical cancer, which is the second most common cancer among women worldwide. The company's HPV test for the follow up screening of women with equivocal pap smears is the first HPV test to have been approved for marketing in the United States by the U.S. Food and Drug Administration (FDA). The company's objective is to establish its HPV test as the new standard of care for cervical cancer screening.

This press release contains forward-looking statements regarding the company's expectations with respect to the success of Digene's business plan. Consequently, actual results may vary materially from these expectations. Meaningful factors which could cause actual results to differ from expectations include, but are not limited to, uncertainty of future profitability, uncertainty of market acceptance, dependence on a single product, impact of competitive products, limited sales and marketing experience, adequacy of third party reimbursement, extent of government regulations, and the uncertainty regarding patents and proprietary rights and technological obsolescence, as well as other factors discussed in the company's Securities and Exchange Commission filings.

                         DIGENE CORPORATION
                           BALANCE SHEETS

                                         June 30
                                  1996             1995

ASSETS
Current assets:
  Cash and cash equivalents   $24,107,325       $1,142,266
  Short-term investments        4,467,978           75,000

Total current assets           32,307,117        3,405,898

Total assets                   33,173,627        4,485,312

LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)

Total current liabilities       2,690,893        1,299,329

Long-Term debt and other          363,453        3,075,076
Redeemable Convertible Preferred
  Stock                                --       13,114,942

Total stockholders' equity
  (deficit)                    30,119,281      (13,004,035)

Total liabilities and
  stockholders' equity
  (deficit)                    33,173,627        4,485,312
-0-
                         DIGENE CORPORATION
                      STATEMENTS OF OPERATIONS
        (in thousands, except net loss per share and shares)

                                  Year Ended June 30
                                  1996          1995

Revenues:
Product sales                  $ 6,359        $ 5,413
Research and development
  contracts                        381            749
Total revenues:                  6,740          6,162

Costs and expenses:
Cost of product sales            2,895          2,652
Research and development         2,430          1,856
Selling and marketing            2,095          1,375
General and administrative       1,792          1,245
Amortization of intangible
  assets                           248            330

Loss from operations            (2,720)        (1,296)
Other income (expense)              40             14
Interest expense                  (207)          (232)
Interest income                    252             --

Net loss                       $(2,635)       $(1,514)

Net loss per share              $(1.30)       $ (1.78)

Weighted average shares
  outstanding                2,026,815        849,924
-0-

                          DIGENE CORPORATION
                       STATEMENTS OF OPERATIONS
         (in thousands, except net loss per share and shares)

                              Three Months Ended June 30
                                1996            1995

Revenues:
Product sales                  $ 1,895        $ 1,564
Research and development
  contracts                         88            146
Total revenues:                  1,983          1,710

Costs and expenses:
Cost of product sales              762            810
Research and development           663            629
Selling and marketing              832            458
General and administrative         774            263
Amortization of intangible
  assets                           (11)            89

Loss from operations            (1,037)          (539)
Other income (expense)             (75)             2
Interest income (expense)          184            (37)

Net loss                       $  (928)       $  (574)

Net loss per share              $(0.19)       $ (0.68)

Weighted average shares
  outstanding                4,858,014        849,924

CONTACT: Digene Corp.

Charles Fleischman, 301/470-6500

or

Morgen-Walke Associates Inc.

Investor Relations: Evan Smith/Paul Furcinito,

Press: Michelle Zawrotny, 212/850-5600