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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]   Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
      Act of 1934. [Fee Required]
                  For the Fiscal Year Ended: December 31, 2001
                                       or
[_]   Transition Report Pursuant to Section 13 or 15(d) of The Securities
     Exchange Act of 1934. [No Fee Required]
                  For the transition period from         to

                           Commission File Number: 0-27558

                                CYTYC CORPORATION
             (Exact name of registrant as specified in its charter)

             Delaware                                   02-0407755
  (State or other jurisdiction of          (I.R.S. Employer Identification No.)
   incorporation or organization)

          85 Swanson Road,                                01719
      Boxborough, Massachusetts                         (Zip Code)
(Address of principal executive offices)

         Registrant's telephone number, including area code:  (978) 263-8000

Securities registered pursuant to Section 12(b) of the Act:
                                         None
Securities registered pursuant to Section 12(g) of the Act:
                              Common Stock, $.01 par value
                                   (Title of class)

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

     The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of February 15, 2002 (based on the closing price as quoted by
The Nasdaq Stock Market as of such date) was $2,522,346,569. As of February 15,
2002, 121,676,149 shares of the registrant's common stock were outstanding.

                         DOCUMENTS INCORPORATED BY REFERENCE
   The registrant intends to file a definitive proxy statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended December 31,
2001. Portions of such proxy statement are incorporated by reference into Part
III of this Form 10-K.

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                                    PART I

Item 1.   Business

The Company

     Cytyc Corporation (the "Company") designs, develops, manufactures and
markets a sample preparation system for medical diagnostic applications. The
Company's ThinPrep(R) System allows for the automated preparation of cervical
cell specimens on microscope slides for use in cervical cancer screening, as
well as for the automated preparation of other cell specimens on microscope
slides for use in non-gynecological testing applications. On May 20, 1996, the
Company received premarket approval ("PMA") from the United States Food and
Drug Administration ("FDA") to market the ThinPrep System for cervical cancer
screening as a replacement for the conventional Pap smear method. On November
6, 1996, the FDA cleared expanded product labeling for the ThinPrep System to
include the claim that the ThinPrep System is significantly more effective in
detecting Low Grade Squamous Intraepithelial Lesions ("LGSIL") and more severe
lesions than the conventional Pap smear method in a variety of patient
populations. The expanded labeling also indicates that the specimen quality
using the ThinPrep System is significantly improved over that of the
conventional Pap smear method. The Company believes that the ThinPrep System
improves accuracy in the detection of cervical cancer and precancerous lesions
by making the slide more representative of the patient's clinical condition,
improving preservation of the sample, standardizing the presentation of cells
on the slide, and reducing the presence of mucus, blood and other obscuring
debris. On February 25, 1997, the FDA approved the Company's supplemental PMA
application for use of a combination of an endocervical brush and spatula
sampling devices, a commonly used method of collecting samples for conventional
Pap smears.

     On September 4, 1997, the FDA approved the Company's supplemental PMA
application for the testing for the human papillomavirus ("HPV") directly from
a single vial of patient specimen collected in ThinPrep solution using Digene
Corporation's ("Digene") Hybrid Capture(R) HPV DNA Assay. In March 1999, the
FDA approved the use of Digene's Hybrid Capture(R) II HPV DNA Assay from a
single vial of patient specimen collected in ThinPrep solution.

     The Company commenced the full-scale commercial launch of the ThinPrep
System for cervical cancer screening in the United States in 1997 and in
selected international markets in 1998. In May 2000, the FDA approved the
ThinPrep(R) 3000 Processor, the Company's next-generation processor for
automated sample preparation. In August 2001, the FDA approved the Company's
PMA Supplement Application for the inclusion of data describing the detection
of High-Grade Squamus Intraepithelial Lesions (HSIL) with the ThinPrep Pap
Test. In December 2001, the Company submitted a supplemental PMA application to
the FDA to allow for testing for Chlamydia Trachomatis (CT) and Neisseria
Gonorrhea (NG) directly from the ThinPrep Pap Test vial using Roche Diagnostics
Corporation ("RDC") COBAS Amplicor(TM) automated system. In January 2002, the
Company submitted a PMA Application to the FDA for the ThinPrep(R) Imaging
System(TM) to aid in cervical cancer screening.

Recent Acquisitions

     In October 2001, the Company announced that it had entered into a
definitive merger agreement to acquire all of the outstanding securities of Pro
Duct Health, Inc. ("Pro Duct"), a privately held company that has developed a
ductal lavage device to enhance the evaluation of risk for breast cancer. In
November 2001, the Company completed its acquisition of Pro Duct by means of a
merger of Pro Duct with and into Cytyc Health Corporation, a wholly-owned
subsidiary of Cytyc Corporation. The Company intends to market the ductal lavage
device as the ThinPrep Breast Test(TM), subject to required regulatory
approvals.

     On February 19, 2002, the Company announced that it had signed a definitive
merger agreement to acquire all of the outstanding securities of Digene in an
exchange offer transaction. The closing of the exchange offer is subject to the
tender of over 50 percent of Digene's outstanding securities, regulatory
approval and other customary closing conditions. Although the Company expects
that its acquisition of Digene will close during the second quarter of 2002, the
Company may not be able to complete the acquisition during the second quarter,
or at all.

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Cervical Cancer

     Cervical cancer is one of the most common cancers among women throughout
the world. Cervical cancer is preceded by curable precancerous lesions that
progress without symptoms over a period of years until they become invasive,
penetrating the cervical epithelium (cellular covering) and entering the
bloodstream or lymph system. In order to detect these precancerous lesions,
gynecologists in the United States typically recommend annual screening
examinations. If detected in the precancerous stage, virtually all cervical
cancer cases are preventable. The treatment of cervical cancer after it reaches
the invasive stage may require surgery, including a hysterectomy, and
chemotherapy or radiation treatment, which are difficult, expensive and may not
be successful.

     The factors associated with the development of cervical cancer are
believed to include early sexual activity, multiple sexual partners, cigarette
smoking and immunosuppression. In addition, a number of recent studies have
concluded that cervical cancer is strongly correlated to the presence of
certain types of HPV. According to these studies, HPV DNA is present in most
cases of precancerous lesions and in more than 90% of cases of intraepithelial
and invasive cancer. Cervical lesions that are HPV-negative or lacking certain
types of HPV are less likely to progress to cervical cancer.

The Pap Smear

     Cervical cancer screening has been conducted since the late 1940s using
the Pap smear, a test developed by Dr. George Papanicolaou. In the United
States, widespread and regular use of the Pap smear as a screening test has
contributed to a greater than 70% decrease in mortality from cervical cancer in
the past. The Pap smear is currently the most widely used screening test for
the early detection of cancer in the United States.

   The Pap Smear Process

     The Pap smear process involves the science of cytology, which is the
microscopic interpretation of precancerous, malignant and other changes in
cells. The conventional Pap smear process begins with the collection of a
cervical specimen during a gynecological examination. To obtain a cervical cell
sample, a sampling device, such as either a brush and spatula or a "broom-like"
device, is used to scrape cells from the surface of the cervix. The sample is
then manually smeared onto a clean microscope slide by the physician who must
then spray the slide within a few seconds with a fixative agent to prevent
damage to the cell specimen from air drying. The slide is then submitted to a
clinical laboratory for manual microscopic examination.

     At the laboratory, a cytotechnologist, a medical professional with special
training in the examination and interpretation of human cells, conducts a
microscopic review of a prepared slide to determine the adequacy of the sample
and the presence of abnormal cells. In determining slide adequacy,
cytotechnologists classify each slide in one of three categories: (i)
satisfactory for evaluation, (ii) satisfactory but limited by ("SBLB") certain
characteristics, or (iii) unsatisfactory for evaluation. The percentage of
unsatisfactory and SBLB slides varies widely from laboratory to laboratory. In
a 1991 study of 600 laboratories, it was reported that up to 20% of slides were
classified as unsatisfactory and up to 40% were classified as SBLB. Frequent
reasons for unsatisfactory or SBLB classifications include excess blood or
mucus that impair viewing or too few cells per slide.

     After determining the adequacy of the slide, the cytotechnologist manually
screens each Pap smear slide with a microscope to differentiate diseased or
abnormal cells from healthy cells based on size, shape and structural details
of the cells and nuclei. Typically, each Pap smear slide is then classified in
accordance with the Bethesda System for Reporting Cervical/Vaginal Cytologic
Diagnoses ("Bethesda System") into one of the following categories: (i)
Negative; (ii) Atypical Squamous Cells of Undetermined Significance/Atypical
Glandular Cells of Undetermined Significance ("ASCUS/AGUS"); (iii) Low Grade
Squamous Intraepithelial Lesions ("LGSIL"); (iv) High Grade Squamous
Intraepithelial Lesion ("HGSIL"); and (v) Carcinoma. Any slide classified as
other than negative is

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considered abnormal and may be precancerous or cancerous. All abnormal slides
are referred to a senior cytotechnologist and pathologist for further review
and final diagnosis.

     Notwithstanding the classifications imposed by the Bethesda System, the
subjective nature of the classification of Pap smear specimens results in
diagnoses that vary widely among cytotechnologists, pathologists and
laboratories. In 1988, to address accuracy and quality control concerns,
Congress adopted the Clinical Laboratory Improvement Amendments of 1988
("CLIA"). CLIA requires cytology laboratories to perform proficiency testing
and quality control by testing cytotechnologists in order to assure a minimum
level of competence and expertise. In addition, the CLIA regulations currently
limit the number of slides screened per day by a cytotechnologist to 100.
Certain states have also adopted regulations further limiting the number of
slides which can be manually examined per day by a cytotechnologist. As a
further quality control measure, the CLIA regulations require that laboratories
manually rescreen at least 10% of the slides that are initially classified as
negative.

     Other methods of rescreening are currently available, including computer
imaging technologies that select certain negative slides or portions of
negative slides for reexamination by the cytotechnologist. These
computer-imaging technologies are intended to provide an additional quality
control measure to help identify false negative diagnoses.

   Follow-Up Treatment of Abnormal Pap Smears

     Women with abnormal Pap smears may have to return to their physician's
office for a repeat Pap smear or to undergo costly colposcopy and biopsy
procedures. A colposcopy involves the physician using a device to visually
examine the surface of the cervix, and if necessary, performing a biopsy.
Treatment of early-stage non-invasive cervical cancer may be accomplished by
procedures to remove the abnormal cells. Once the cancer reaches the invasive
stage, the patient's chances for recovery are diminished and more radical
treatment is typically required, such as a hysterectomy and chemotherapy or
radiation therapy. These procedures may expose the patient to risk and cost and
result in significant physical and psychological stress.

Problems with the Conventional Pap Smear

     In spite of the success of the Pap smear in reducing deaths due to
cervical cancer, the test has significant limitations, including inadequacies
in sample collection and slide preparation, slide interpretation errors and the
inability to use the specimen for additional diagnostic tests. These
limitations result in a substantial number of inaccurate test results,
including false negative diagnoses.

   False Negative Diagnoses

     The limitations of the conventional Pap smear method in sample collection,
slide preparation and interpretation result in a substantial number of
inaccurate test results in the form of false negative diagnoses. A false
negative diagnosis may allow the disease to progress to a later-stage of
development before being detected, thereby requiring a more expensive and
invasive course of treatment and diminishing the likelihood of successful
treatment. Reports of the false negative rate of the Pap test vary widely,
between 5% and 55%. Past studies have suggested that approximately 50% of false
negative diagnoses are attributable to inadequacies in sample collection and
slide preparation and approximately 50% are attributable to slide
interpretation errors. The most comprehensive literature survey to date was
recently published by the Agency for Health Care Policy and Research (AHCPR), a
division of the U.S. Department of Health and Human Services. The "Evaluation
of Cervical Cytology" evidence report concluded that the false negative rate
for the conventional Pap smear is approximately 49% and that about two-thirds
of false negatives are due to sampling error and the remaining one-third due to
detection error.

   Inadequacies in Sample Collection and Slide Preparation

     There are a variety of difficulties with current methods of cell
collection, cell transfer and slide preparation. These difficulties include
cell loss, improper fixation of the cells (typically, from air-drying), thick
and uneven

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smearing of cells on the slide, and excess blood, mucus and other
obscuring debris on the slide. A study published in the American Journal of
Clinical Pathology in February 1994 reported that as much as 80% of the sample
taken from a patient using the conventional Pap smear method is not transferred
to the microscope slide and remains on the discarded collection device. This
discarded portion of the sample may contain the abnormal cells necessary for an
accurate diagnosis. In addition to the problem of cell transfer, the
conventional Pap smear method produces inconsistent and non-uniform slides with
extreme variability in quality, making examination difficult. The Company
believes that these limitations are responsible for a large percentage of
slides being classified as SBLB. These slides are more difficult to interpret
and increase the uncertainty of an accurate diagnosis. Consequently, patients
are often subjected to the inconvenience and expense of return office visits
for repeat testing and to the anxiety resulting from the inconclusive nature of
the initial test. The Company believes that these repeat visits and
examinations also result in significant costs to the healthcare system.

   Slide Interpretation Errors

     The process of screening and interpreting a manually prepared Pap smear is
complex and tedious. This process requires constant vigilance, as approximately
90% to 95% of all Pap smear diagnoses in the United States are negative. In
addition, the process is prone to error as a result of the complexity of
properly evaluating and categorizing subtle and minute changes in cellular or
nuclear detail. The screening process requires intense visual review through a
microscope of a large volume of slides, each of which typically contains 50,000
to 300,000 cervical cells. The small percentage of Pap smears that contain any
abnormality may, in turn, contain only a small number of abnormal cells among
the vast number of normal cells. Cytotechnologists generally review each slide
for approximately five to ten minutes and may review up to 100 slides per day.
All of these factors contribute to the incidence of false negative diagnoses.

   Lack of Additional Testing Capability

     The conventional Pap smear method does not permit additional or adjunct
testing from the original patient sample. The ability to produce multiple
slides from a single sample could be used by clinical laboratories for
follow-up testing, quality control or proficiency testing. Further, the
conventional Pap smear method requires the patient to be called back to the
physician's office to provide a second sample if additional testing, such as
HPV testing, is desired. The Company believes that the ability to test for HPV
directly from the ThinPrep collection vial has the potential for substantial
healthcare cost savings through reduced costly management of borderline
cervical abnormalities.

The ThinPrep System

     The Company believes that the ThinPrep System offers a number of benefits
which address limitations of the conventional Pap smear method, including
improved accuracy in the detection of cervical cancer and precancerous lesions,
standardization and simplification of the sample preparation process, the
ability to permit multiple tests to be conducted from a single sample and
improved productivity in screening by reducing cytotechnologist fatigue and the
time required to examine each slide. In August 1997, Obstetrics & Gynecology, a
preeminent, widely read, peer-reviewed journal on women's healthcare issues,
published a major study describing the effectiveness of the ThinPrep(R) Pap
Test(TM) in screening for cervical cancer.

     The ThinPrep System, which was cleared for marketing as a replacement for
the conventional Pap smear method for cervical cancer screening by the FDA on
May 20, 1996, consists of the ThinPrep(R) Processor and related disposable
reagents, filters and other supplies. The ThinPrep System is designed to reduce
the incidence of false negative diagnoses, improve slide quality, reduce
inconclusive SBLBs and enable a single sample to be used for additional
diagnostic testing. On November 6, 1996, the FDA cleared expanded product
labeling for the ThinPrep System to include the claim that the ThinPrep System
is significantly more effective in detecting LGSIL and more severe lesions than
the conventional Pap smear method in a variety of patient populations. This
expanded labeling also indicates that the specimen quality using the ThinPrep
System is significantly improved over that of the conventional Pap smear
method. In February 1997, the Company received FDA approval of the Company's

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supplemental PMA application for the use of a combination of an endocervical
brush and spatula sampling devices, a commonly used method of collecting
samples for conventional Pap smears. In September 1997, the FDA approved the
Company's supplemental PMA application for the testing for HPV directly from a
single vial of patient specimen collected in a ThinPrep solution using the
Hybrid Capture HPV DNA Assay of Digene. In March 1999, the FDA approved the use
of Digene's Hybrid Capture II HPV DNA Assay from a single vial of patient
specimen collected in ThinPrep solution. The Company commenced the full-scale
commercial launch of the ThinPrep System for cervical cancer screening in the
United States in 1997 and in selected international markets in 1998. In May
2000, the FDA approved the ThinPrep 3000 Processor, the Company's
next-generation processor for automated sample preparation. In August 2001, the
FDA approved the Company's PMA Supplement Application for the inclusion of data
describing the detection of High-Grade Squamus Intraepithelial Lesions (HSIL)
with the ThinPrep Pap Test. In December 2001, the Company submitted a
supplemental PMA application to the FDA to allow for testing for Chlamydia
Trachomatis (CT) and Neisseria Gonorrhea (NG) directly from the ThinPrep Pap
Test vial using RDC's COBAS Amplicor(TM) automated system. In January 2002, the
Company submitted a PMA Application to the FDA for the ThinPrep Imaging System
to aid in cervical cancer screening.

     The ThinPrep process begins with the patient's cervical sample being taken
by the physician using a cervical sampling device which, rather than being
smeared on a microscope slide, is rinsed in a vial filled with the Company's
proprietary PreservCyt(R) Solution. This enables virtually all of the patient's
cell sample to be preserved before the cells can be damaged by air drying. The
ThinPrep specimen vial is then labeled and sent to a laboratory equipped with a
ThinPrep Processor for slide preparation and screening.

     At the laboratory, the ThinPrep specimen vial is inserted into a ThinPrep
Processor, a proprietary sample preparation device which automates the process
of preparing cervical specimens. Once the vial is inserted into the ThinPrep
Processor, a gentle dispersion step breaks up blood, mucus, non-diagnostic
debris and large sheets of cells and homogenizes the cell population. The cells
are then automatically collected on the Company's proprietary TransCyt(R)
Filter, which incorporates an eight micron membrane specifically designed to
collect abnormal and cancerous cells. The ThinPrep Processor constantly
monitors the rate of flow through the TransCyt Filter during the collection
process in order to prevent the cellular presentation from being too scant or
too dense. A thin layer of cells is then transferred to a glass slide in a 20
mm-diameter circle and the slide is automatically deposited into a preservative
solution.

     The Company's proprietary reagents and supplies include PreservCyt
Solution to collect and transport cervical samples to the laboratory for
optimal cell preservation and TransCyt Filters to collect cells and remove
non-diagnostic debris and mucus. The Company also sells ThinPrep(R) Microscope
Slides, high-quality microscope slides manufactured to the Company's
specifications, which improve cell adhesion to the slide.

Clinical Trial Results

     In October 1995, the Company completed the clinical trial used to support
its PMA application, which was a blinded, split-sample study performed at six
clinical sites in the United States, including three screening centers and
three hospital sites. A total of 6,747 patients were included. The study
compared the effectiveness of the ThinPrep System to the conventional Pap smear
method for the detection of precancerous lesions of the cervix. Specimen
adequacy was also compared.

     The results from the three screening centers indicated a 65% improvement
in the detection of disease, while in the three hospital sites in which
patients had historically exhibited high prevalence rates of cervical
abnormalities, the ThinPrep method demonstrated a 6% improvement. In May 1996,
based on the clinical trial results, the FDA approved the ThinPrep 2000 System
as a replacement for the conventional Pap smear method in screening for the
presence of atypical cells, cervical cancer, and its precursor lesions. After
further analysis of the clinical trial data, in November 1996, the FDA cleared
expanded product labeling to include that the ThinPrep System is significantly
more effective in detecting LGSIL and more severe lesions than the conventional
Pap smear method in a variety of patient populations. The FDA also cleared
expanded product labeling to include that the specimen quality using the
ThinPrep System is significantly improved over that of the conventional Pap
smear method. In May 2000, the FDA

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approved the ThinPrep 3000 Processor, the Company's next generation processor
for automated sample preparation. In August 2001, the FDA approved a PMA
Supplement allowing inclusion of data describing the detection of High-Grade
Squamous Intraepithelial Lesions (HSIL) with the ThinPrep Pap Test. The data,
from a multi-site clinical outcomes trial, is now included in the Company's
Package Insert that accompanies the ThinPrep System.

     Following initial FDA approval of the ThinPrep System in May 1996, the
Company conducted a multi-site direct-to-vial clinical study to evaluate
the ThinPrep 2000 System versus the conventional Pap smear for the detection of
High-Grade Squamous Intraepithelial and more severe lesions (HSIL+). Two types
of patient groups were enrolled in the trial from ten leading academic
hospitals in major metropolitan areas throughout the United States. From each
site, one group consisted of patients representative of a routine screening
population and the other group was made up of patients representative of a
referral population enrolled at the time of colposcopic examination. The
ThinPrep specimens were collected prospectively and compared against a
historical control cohort. The historical cohort consisted of data collected
from the same clinics and clinicians (if available) used to collect the
ThinPrep specimens. These data were collected sequentially from patients seen
immediately prior to the initiation of the study. The results from this study
showed a detection rate of 511/20,917 for the conventional Pap smear versus
399/10,226 for the ThinPrep slides. For these clinical sites and these study
populations, this indicates a 59.7 percent (p(less than)0.001) increase in
detection of HSIL+ lesions for the ThinPrep System.

     In July 1999, the Company announced that it had successfully completed
feasibility studies of the ThinPrep Imaging System to aid in cervical cancer
screening and in December 2000 began clinical trials. In January 2002, the
Company submitted a PMA Application to the FDA for the ThinPrep Imaging System.
This PMA Application is supported by a prospective, multi-center clinical study
that evaluated the performance of the ThinPrep Imaging System in direct
comparison to a manual review method. More than 9,500 patients from both
low-risk and high-risk populations were included in the study. The ThinPrep
Imaging System is an interactive computer system that the Company believes will
assist cytotechnologists in the primary screening and diagnosis of ThinPrep Pap
Test slides. The system combines imaging technology to identify diagnostic
fields of interest with automated microscope stage movements to facilitate
locating these fields. The system is expected to increase a cytology
laboratory's screening productivity while leveraging the increased sensitivity
of the ThinPrep Pap Test.

     In December 2001, the Company submitted a supplemental PMA application to
the FDA to allow for testing for CT/NG directly from the ThinPrep Pap Test vial
using RDC's COBAS Amplicor(TM) automated system.

     There can be no assurance that the Company will obtain necessary
regulatory approvals for the ThinPrep Imaging System, RDC's CT/NG test from the
ThinPrep vial, or any other new products or applications.

     Since FDA approval of the ThinPrep System in May of 1996, a number of
studies have been published or presented that evaluate the ThinPrep Pap Test.
To date, more than 30 major studies evaluating the performance of the ThinPrep
Pap Test compared to the conventional Pap smear have been published in
peer-reviewed journals. The studies have included more than 300,000 patients in
the ThinPrep Pap Test cohort and have been conducted in every region of the
United States, as well as Europe, Asia, Central America and Australia. In
total, more than 70 studies have been published demonstrating a wide range of
benefits including increased disease detection, reduction of equivocal
diagnoses, improved specimen adequacy, adjunctive molecular testing, morphology
assessment, and cost effectiveness.

Non-Gynecological Cytology

     In May 1991, the Company began commercial shipments of the ThinPrep(R)
Processor to cytology laboratories in the United States for use in
non-gynecological testing applications. Non-gynecological specimens include
sputum; voided and catheterized urine; body fluids such as peritoneal fluid,
ascites fluid, or cerebrospinal fluid; brushing of respiratory or
gastrointestinal tracts; and fine needle aspiration specimens obtained from a
variety of sources such as the breast, thyroid, lung or liver. These samples
are evaluated in patients in whom malignancy is strongly suspected or as
follow-up information in patients previously diagnosed and treated for cancer.

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Marketing and Sales

     The Company's marketing and sales strategy is to achieve broad market
acceptance of the ThinPrep System for cervical cancer screening. A critical
element of its strategy is to utilize the results of the Company's 1995
clinical trial and expanded FDA labeling to demonstrate the safety and efficacy
of the ThinPrep System to healthcare providers, third-party payors and clinical
laboratories. The Company believes that coordination of the activity of these
three market segments is necessary to achieve the desired level of market
penetration of the ThinPrep System. In 1997, the Company implemented a
full-scale commercial launch of the ThinPrep System in the United States with
its direct marketing and sales force organization, complemented by the
initiation of strategic marketing relationships with third parties.

     The Company continues to expand its direct marketing and sales
organization in the United States, supported by customer and technical service
representatives. The Company's direct marketing and sales organization focuses
on the clinical and economic benefits of the ThinPrep System for healthcare
providers, third-party payors and clinical laboratories. The Company designs
its marketing programs to establish and reinforce the recognition of its
corporate and product names through investments in medical advertising, direct
mail, focused medical educational symposia, trade shows and other promotional
activities. The Company has also initiated an education and training program
which will be offered to accredited cytology schools across the United States.

     In January 2000, the Company entered into a supply and co-marketing
agreement with Quest Diagnostics Incorporated ("Quest") to market the Company's
ThinPrep Pap Test as Quest's exclusive liquid-based cervical cancer screening
methodology.

     In October 2000, the Company entered into an agreement with RDC, exclusive
in the United States and Puerto Rico, to co-promote the benefits of testing for
chlamydia and gonorrhea using RDC's COBAS(R) AMPLICOR(R) CT/NG Test directly
from the ThinPrep collection vial. The companies also intend to explore the
potential for collaborating on a portfolio of additional screening and
diagnostic tests based on the companies' respective technologies.

     In January 2001, the Company entered into an agreement with Digene,
exclusive in the United States and Puerto Rico, to co-promote the benefits of
testing for human papillomavirus (HPV) using Digene's Hybrid Capture(R) II HPV
DNA Assay directly from the ThinPrep collection vial. The co-promotion program
has focused on promoting Digene's HPV DNA test, using the residual material in
ThinPrep collection vials, as the optimal patient management strategy for
borderline cytology results.

     Following the initial market launch of the ThinPrep product in the United
States, the Company has more recently initiated its marketing and sales efforts
in Europe and Asia Pacific. The Company established subsidiaries in Switzerland
and Australia in 1997, in France and Italy in 1998, in Canada and the United
Kingdom in 1999 and in Germany in 2001 to handle sales, service, training and
distribution to clinical laboratories. The Company's strategy is to establish a
worldwide selling channel appropriate for developing an international
customer-base, taking into consideration factors such as government
regulations, screening cycles and clinical practices of the particular country
or region. The Company is also evaluating the use of direct and indirect
international sales channels, including contract sales organizations,
distributors and marketing partners.

     The Company believes that both domestic and international sales efforts
will continue to involve a lengthy process, requiring the Company to educate
healthcare providers, clinical laboratories, and third-party payors regarding
the clinical benefits and cost-effectiveness of the ThinPrep System and any
other new products and applications, such as the ductal lavage device obtained
by the Company in its acquisition of Pro Duct. The Company's success and growth
will depend to a large extent on market acceptance of the ThinPrep System and
any such other products and applications among healthcare providers,
third-party payors and clinical laboratories. The Company will continue to sell
ThinPrep Processors to customers and charge separately for related disposable
reagent filters and supplies. In the past, the Company has offered discounts to
stimulate demand for the ThinPrep System and

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may elect to do so in the future, which discounts could have a material adverse
effect on the Company's business, financial condition and results of
operations.

     In order to effectively market the ThinPrep System for cervical cancer
screening and any other new products and applications, such as the
ductal lavage device, the Company will need to continue to increase its
marketing and sales capabilities. No assurance can be given that the Company's
direct sales force or strategic marketing relationships will succeed in
promoting the ThinPrep System or any other new products or applications to
healthcare providers, third-party payors or clinical laboratories, or that
additional marketing and sales channels will be successfully established. While
the Company is currently evaluating marketing and sales channels abroad,
including contract sales organizations, distributors and marketing partners,
the Company has established very limited foreign sales channels. There can be
no assurance that the Company will be able to recruit and retain skilled
marketing, sales, service or support personnel or foreign distributors, or that
the Company's marketing and sales efforts will be successful. The Company's
marketing success in the United States and abroad will depend on whether it can
obtain required regulatory approvals, successfully demonstrate the
cost-effectiveness of the ThinPrep System and any such other new products and
applications, further develop its direct sales capability and establish
arrangements with contract sales organizations, distributors and marketing
partners. Failure to successfully expand its marketing and sales capabilities
in the United States or establish its international marketing and sales
organization would have a material adverse effect on the Company's business,
financial condition and results of operations.

Third-Party Reimbursement

     The Company intends to focus on obtaining coverage and reimbursement from
major national and regional managed care organizations and insurance carriers
throughout the United States. Most of the third-party payor organizations
independently evaluate new diagnostic procedures by reviewing the published
literature and the Medicare coverage and reimbursement policy on the specific
diagnostic procedure. To assist the third-party payors in their respective
evaluations of the ThinPrep System, the Company provides scientific and
clinical data to support its claims of the safety and efficacy of the ThinPrep
System. The Company believes that the ThinPrep System will allow for earlier
detection of LGSIL and more severe lesions and result in less aggressive and
costly treatment procedures. In addition, the Company expects that the ThinPrep
System will significantly improve specimen adequacy, thereby reducing repeat
office visits and test procedures and thus overall healthcare management costs.
The Company will focus on earlier disease detection and cost savings benefits
in establishing reimbursement for the ThinPrep method for cervical cancer
screening.

     The cost per ThinPrep Pap Test, plus a laboratory mark-up, is billed by
laboratories to third-party payors or patients and typically results in a
higher cost than the current charge for conventional Pap tests. Although a
number of managed care organizations have added the ThinPrep Pap Test to their
coverage, there can be no assurance that third-party payors will provide or
continue to provide such coverage, that reimbursement levels will be adequate
or that healthcare providers or clinical laboratories will use the ThinPrep
System for cervical cancer screening in lieu of the conventional Pap smear
method. In addition, the Company will be required to secure adequate
third-party reimbursement for any new products it develops or obtains,
including the ductal lavage device obtained in the Company's acquisition of Pro
Duct in November 2001.

     There is significant uncertainty concerning third-party reimbursement for
the use of any medical device incorporating new technology. Reimbursement by a
third-party payor depends on a number of factors, including the level of demand
by healthcare providers and the payor's determination that the use of the
product represents a clinical advance compared to current technology and is
safe and effective, medically necessary, appropriate for specific patient
populations and cost-effective. Since reimbursement approval is required from
each payor individually, seeking such approvals is a time-consuming and costly
process, which requires the Company to provide scientific and clinical data to
support the use of its products to each payor separately. There can be no
assurance that third-party reimbursement will be or remain available for the
ThinPrep System, the Pro Duct ductal lavage device, or any other products that
may be obtained or developed by the Company, or that such third-party
reimbursement will be adequate.

                                      9

<PAGE>

     Since January 1, 1998, the Company's laboratory customers have been able
to request reimbursement for the ThinPrep Pap Test from health insurance
companies and the Center for Medicare and Medicaid Services ("CMS") using a
newly assigned Common Procedure Technology ("CPT") code specifically for
liquid-based monolayer cervical cell specimen preparation. CPT codes are
assigned, maintained and revised by the CPT Editorial Board, which is
administered by the American Medical Association, and are used in the
submission of claims to third-party payors for reimbursement for medical
services. CMS has established a national fee of $28 for the CPT codes
describing the ThinPrep Pap Test. This reimbursement level is nearly double the
level of reimbursement for the conventional Pap smear.

     The Company's direct sales force is actively working with current
laboratory customers and health insurance companies to facilitate
implementation and reimbursement under the CPT code. As of December 31, 2001,
based on information provided to the Company, the Company believes that
substantially all of the 367 health insurance companies which announced
coverage of the ThinPrep Pap Test have implemented the new CPT code and have
established a reimbursement amount. There are approximately six hundred managed
care organizations and other third-party payors in the United States. There can
be no assurance, however, that the new CPT code will be successfully
implemented by additional third-party payors, that any reimbursement delays
will be successfully reduced, or that reimbursement levels under the new CPT
code will be or remain adequate.

     The Company has limited experience in obtaining reimbursement for its
products in the United States or other countries. In addition, third-party
payors are routinely limiting reimbursement and coverage for medical devices
and in many instances are exerting significant pressure on medical suppliers to
lower their prices. Lack of or inadequate reimbursement by government and other
third-party payors for the Company's products would have a material adverse
effect on the Company's business, financial condition and results of
operations. Further, outside of the United States, healthcare reimbursement
systems vary from country to country, and there can be no assurance that
third-party reimbursement will be made available at an adequate level, if at
all, for the Company's products under any other reimbursement system.

Manufacturing

     In January 2000, the Company acquired Acu-Pak, Inc. ("Acu-Pak"), a
contract packager in Londonderry, New Hampshire that was, prior to the
acquisition, manufacturing, filling and distributing vials containing the
Company's solutions for all of its ThinPrep line of products. The Company
currently leases approximately 97,000 square feet of commercial space in
Boxborough, MA and believes that its existing facility, along with the Acu-Pak
production facility consisting of approximately 45,000 square feet of
commercial space, are adequate to meet the existing production requirements for
the ThinPrep System. In November 2001, as part of its acquisition of Pro Duct, a
manufacturer of medical devices in Menlo Park, California, the Company entered
into a lease for a facility consisting of approximately 35,000 square feet. The
lease of this facility terminates on April 30, 2003. The Company has subleased
approximately 17,000 square feet of office space in Menlo Park, California to a
third party for eighteen months ending April 30, 2003. In connection with the
acquisition, the Company has committed to a plan to abandon the leased
facilities. The Company has accrued approximately $787,000 for the abandonment
of the leased facility, representing the present value of future minimum lease
payments less estimated sub-lease receipts. The Company believes that its
facilities in Massachusetts and New Hampshire will satisfy its operational
requirements for the foreseeable future.

     The Company has expanded its manufacturing capacity by adding
approximately $4.1 million of additional automated equipment, which was
installed in late 2001. Of this amount, approximately $3.8 million was paid in
2000 and approximately $0.3 million was paid in 2001.

     The Company's manufacturing process is subject to pervasive and continuing
regulation by the FDA, including the FDA's Quality System Regulation ("QSR").
Failure to comply with such regulations would materially impair the Company's
ability to achieve or maintain commercial-scale production. Further, any
failure of the Company's equipment to perform to the Company's specifications
could impair the Company's ability to produce adequate

                                      10

<PAGE>

quantities of ThinPrep supplies. As a result, the Company may be subject to
total or partial suspension of production, withdrawal of approval, and recall
or seizure of products by the FDA in the event of product malfunction or
failure.

     In October 1997, the Company obtained ISO 9001 registration, an
international quality standard. The Company has also met the applicable
requirements to use the "CE" mark for its ThinPrep System. There can be no
assurance that the Company will be able to maintain compliance with ISO or CE
mark requirements. Failure to maintain compliance with the applicable
manufacturing requirements of various regulatory agencies would have a material
adverse effect on the Company's business, financial condition and results of
operations.

     Certain key components of the Company's ThinPrep System are currently
provided to the Company by single sources. In the event that the Company is
unable to obtain sufficient quantities of such components on commercially
reasonable terms, or in a timely manner, the Company would not be able to
manufacture its products on a timely and cost-competitive basis, which would
have a material adverse effect on the Company's business, financial condition
and results of operations.

Research and Development

     The Company's core research and development strategy is to continue to
develop innovative medical diagnostic applications of the ThinPrep technology
and to continue to enhance the ThinPrep System. The Company has established a
program to further enhance and automate the ThinPrep Processor. The Company's
next generation instrument, the ThinPrep 3000 Processor, was designed to
provide batch processing and walk-away capability by increasing capacity to 80
sample vials and more fully automating the slide preparation process. In May
2000, the FDA approved the ThinPrep 3000 Processor, which is now commercially
available.

     The Company is also evaluating additional diagnostic applications of its
ThinPrep technology in testing for the presence of other types of cancers and
sexually transmitted diseases. The clinical laboratory companies have worked
with the Company on marketing and sales programs, which generally involve joint
marketing geared toward promoting the Company's products to physicians and
third-party payors.

     In January 2000, the Company entered into a supply and co-marketing
agreement with Quest to market the ThinPrep Pap Test as Quest's exclusive
liquid-based cervical cancer screening methodology.

     In October 2000, the Company entered into an agreement with RDC, exclusive
in the United States and Puerto Rico, to co-promote the benefits of testing for
chlamydia and gonorrhea using RDC's COBAS(R) AMPLICOR(R) CT/NG Test directly
from the ThinPrep collection vial. The companies also intend to explore the
potential for collaborating on a portfolio of additional screening and
diagnostic tests based on the companies' respective technologies. In December
2001, the Company submitted a supplemental PMA application to the FDA to allow
for testing for CT/NG directly from the ThinPrep Pap Test vial using RDC's
COBAS Amplicor(TM) automated system.

     In January 2001, the Company entered into an agreement with Digene,
exclusive in the United States and Puerto Rico, to co-promote the benefits of
testing for human papillomavirus (HPV) using Digene's Hybrid Capture(R) II HPV
DNA Assay directly from the ThinPrep collection vial. The co-promotion program
is initially focusing on promoting Digene's HPV DNA test and using the residual
material in ThinPrep collection vials as the optimal patient management
strategy for borderline cytology results.

     The Company has not yet determined additional applications, if any, it
will seek to develop and commercialize. There can be no assurance that the
Company will be successful in developing or marketing additional applications.
Furthermore, any additional applications may require submission of a PMA
application or PMA supplement prior to the marketing of such applications.
There can be no assurance that the FDA would approve such submissions on a
timely basis, if at all.

                                      11

<PAGE>

     In January 2002, the Company submitted a PMA Application to the FDA for
the ThinPrep Imaging System to aid in cervical cancer screening. There can be
no assurance that the Company will obtain necessary regulatory approvals.

     The Company's expenditures for research and development (which includes
clinical trials, regulatory affairs and engineering) were approximately $13.4
million, $14.2 million, and $19.0 million for the years ended December 31,
1999, 2000 and 2001, respectively. Research and development for 2001 period
excludes a one-time charge of $56.0 million for in-process research and
development related to the Pro Duct acquisition.

Government Regulation

     The manufacture and sale of medical diagnostic devices intended for
commercial use are subject to extensive governmental regulation in the United
States and in other countries. The Company's existing products, including the
ThinPrep System and the Pro Duct ductal lavage device, are regulated in the
United States as medical devices by the FDA under the Federal Food, Drug, and
Cosmetic Act ("FDC Act") and generally require premarket approval through the
filing of a PMA prior to commercial distribution. In addition, certain material
changes or modifications to medical devices also are subject to the FDA review
and approval. Pursuant to the FDC Act, the FDA regulates the research, testing,
manufacture, safety, labeling, storage, record keeping, advertising,
distribution and production of medical devices in the United States.
Non-compliance with applicable requirements of the FDC Act can result in the
failure of the government to grant premarket approval for devices, withdrawal
of clearances or approvals, total or partial suspension of production, fines,
injunctions, civil penalties, recall or seizure of products, and criminal
prosecution.

     The regulatory approval process can be expensive, lengthy and uncertain.
There can be no assurance that the Company will be able to obtain necessary
regulatory approvals for any proposed future products or modifications of
existing products. The failure to obtain approvals, loss of previously received
approvals, or failure to comply with existing or future regulatory
requirements, would have a material adverse effect on the Company's business,
financial condition and results of operations.

     The FDA's regulations require agency approval of a PMA supplement for
certain changes if they affect the safety and effectiveness of the device,
including, but not limited to, new indications for use; labeling changes; the
use of a different facility or establishment to manufacture, process, or
package the device; changes in manufacturing facilities, methods, or quality
control systems; and changes in performance or design specifications.

     The ThinPrep System for cervical cancer screening received PMA approval in
May 1996. In May 2000, the FDA approved the ThinPrep 3000 Processor, the
Company's next generation processor for automated sample preparation.

     In December 2001, the Company submitted a supplemental PMA application to
the FDA to allow for testing for Chlamydia Trachomatis (CT) and Neisseria
Gonorrhea (NG) directly from the ThinPrep Pap Test vial using RDC's COBAS
Amplicor(TM) automated system. In January 2002, the Company submitted a PMA
Application to the FDA for the ThinPrep Imaging System. These applications have
not received regulatory approval to date. There can be no assurance that such
approvals will be obtained on a timely basis, or at all. The Company
anticipates that any other proposed uses for the ThinPrep System may require
approval of a PMA supplement or a new PMA application.

     On February 19, 2002, the Company announced that it had signed a definitive
merger agreement to acquire all of the outstanding securities of Digene in an
exchange offer transaction. If the merger is consummated, Digene will be a
wholly owned subsidiary of the Company or will be merged with and into the
Company. The Company has been advised that Digene filed a PMA Supplement with
the FDA in October 2001 for approval to use Digene's Hybrid Capture 2 HPV DNA
Test in conjunction with the Pap smear as a primary screen for cervical cancer
and its precursors in women age 30 and older. The FDA panel hearing on Digene's
PMA supplement is scheduled to be held in March 2002. The Company does not know
whether the FDA will approve Digene's PMA Supplement. If the PMA Supplement is
not approved or if such approval is substantially delayed, Digene's business,
financial condition, and results of operations could be materially and adversely
affected.

     In July 1997, several petitions were filed requesting that the FDA review
the PMA approval granted to the ThinPrep System. The petitions were filed
pursuant to a provision of the FDC Act permitting any interested party to
initiate a process by which the FDA may review an approval order and may issue
an order affirming, reversing or modifying the approval. The Company responded
to the petitions by submitting comments in December 1997 arguing that the FDA
should deny them.

                                      12

<PAGE>

     In April 1999, the FDA ruled on the petitions objecting to the approval of
the ThinPrep Pap Test. In a letter addressed to petitioners, and copied to
Cytyc, the FDA concluded: "It would serve no useful purpose to convene an
advisory committee of experts to consider the objections raised in the
petitions." The FDA addressed each of the 10 objections raised by the seven
petitioners. In each instance, the agency concluded that there was no
justification for review.

     The ThinPrep System is, and any other products manufactured or distributed
by the Company pursuant to an approved PMA application or supplements will be,
subject to pervasive and continuing regulation by the FDA, including
record-keeping requirements, reporting of adverse experience with the use of
the device, postmarket surveillance, postmarket registration and other actions
as deemed necessary by the FDA. The Company is also subject to FDA inspection
for compliance with regulatory requirements. Product labeling and promotional
activities are also subject to scrutiny by the FDA and, in certain instances,
by the Federal Trade Commission. Products may only be promoted by the Company
and any of its distributors for their approved indications. No assurance can be
given that modifications to the labeling which may be required by the FDA in
the future will not adversely affect the Company's ability to market or sell
the ThinPrep System, the Pro Duct ductal lavage device, or any other products
developed or obtained by the Company.

     The Company also is subject to numerous federal, state and local laws
relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. There can be no assurance that the Company
will not be required to incur significant costs to comply with such laws and
regulations in the future, or that such laws or regulations will not have a
material adverse effect upon the Company's business, financial condition and
results of operations.

     Sales of medical devices outside of the United States are subject to
foreign regulatory requirements that vary widely from country to country. The
time required to obtain approval to market and sell the ThinPrep System from a
foreign country may be longer or shorter than that required for FDA approval
and the requirements may differ. No assurance can be given that such foreign
regulatory approvals will be granted on a timely basis, or at all. In addition,
there can be no assurance that the Company will meet the FDA's export
requirements or receive FDA export approval when such approval is necessary, or
that countries to which the devices are to be exported will approve the devices
for import. Failure of the Company to meet the FDA's export requirements or
obtain FDA export approval when required to do so, or to obtain approval for
import, could have a material adverse effect on the Company's business,
financial condition and results of operations.

     The laboratories that would purchase the ThinPrep System are subject to
extensive regulation under CLIA, which requires laboratories to meet specified
standards in the areas of personnel qualifications, administration,
participation in proficiency testing, patient test management, quality control,
quality assurance and inspections. The Company believes that the ThinPrep device
operates in a manner that will allow laboratories purchasing the device to
comply with CLIA requirements. However, there can be no assurance that adverse
interpretations of current CLIA regulations or future changes in CLIA
regulations would not have an adverse effect on sales of the ThinPrep System.

Patents, Trademarks, Copyrights, Licenses and Proprietary Rights

     The Company relies on a combination of patents, trademarks, trade secrets,
copyrights and confidentiality agreements to protect its proprietary technology,
rights and know-how. The Company pursues patent protection in the United States
and files corresponding patent applications in certain foreign jurisdictions.
The Company holds seventeen issued United States patents, eleven pending United
States patent applications, and corresponding foreign patents or patent
applications relating to various aspects of its ThinPrep technology. As part of
the Company's acquisition of Pro Duct, the Company acquired an interest in
certain United States patents and patent applications, together with certain
corresponding foreign counterparts, owned or licensed by Pro Duct, relating to
various aspects of the Pro Duct ductal lavage technology. There can be no
assurance, however, that pending patent applications will ultimately issue as
patents or that the claims allowed in any of the Company's existing or future
patents will provide competitive advantages for the Company's products or will
not be successfully challenged or circumvented by competitors. Under current
law, certain patent applications filed with the United States Patent and
Trademark Office before November 29, 2000 may be maintained in secrecy until a
patent is issued. Patent applications filed with the United States Patent and
Trademark Office on or after November 29, 2000, as well as patent applications
filed in foreign countries, may be published some time after filing but prior to
issuance. The right to a patent in the United States is attributable to the
first to invent, not the first to file a patent application. The Company cannot
be sure that its products or technologies do not infringe patents

                                      13

<PAGE>

that may be granted in the future pursuant to pending patent applications or
that its products do not infringe any patents or proprietary rights of third
parties. In the event that any relevant claims of third-party patents are
upheld as valid and enforceable, the Company could be prevented from selling
its products or could be required to obtain licenses from the owners of such
patents or be required to redesign its products to avoid infringement. There
can be no assurance that such licenses would be available or, if available,
would be on terms acceptable to the Company or that the Company would be
successful in any attempts to redesign its products or processes to avoid
infringement. The Company's failure to obtain these licenses or to redesign its
products would have a material adverse effect on the Company's business,
financial condition and results of operations.

     On February 19, 2002, the Company announced that it had signed a definitive
merger agreement to acquire all of the outstanding securities of Digene in an
exchange offer transaction. If the merger is consummated, Digene will be a
wholly owned subsidiary of the Company or will be merged with and into the
Company. The Company has been advised that Digene may not have rights under some
patents or patent applications related to its products or product candidates
that are held by third parties, and may need to obtain such rights in order to
begin or continue selling a product. Digene may be unable to obtain such rights
on commercially reasonable terms or at all. Digene has in-licensed patents to a
number of cancer-causing human papillomavirus types which, together with the
patents to cancer-causing human papillomavirus types that it owns, may provide
it with a competitive advantage. Digene may lose any such competitive advantage
if these licenses terminate or if the patents licensed thereunder expire or are
declared invalid. In addition, Digene may infringe the intellectual property
rights of third parties, which could result in expensive intellectual property
litigation and could prevent the development or marketing of current or proposed
products.

     Digene has received inquiries regarding possible patent infringements
relating to, among other things, aspects of its Hybrid Capture technology. Based
upon information provided by Digene, the Company believes that the patents of
others to which these inquiries relate are either not infringed by Digene's
Hybrid Capture technology or are invalid. However, there can be no assurance
that such claims will not be asserted and, if asserted, such claims may require
Digene to enter into a royalty-bearing license or may prevent the development
and marketing of any current or proposed product of Digene. Digene also may be
forced to initiate or respond to expensive legal proceedings to protect Digene's
patent position or other proprietary rights.

     There can be no assurance that the obligations of employees of the Company
and third parties with whom the Company has entered into confidentiality
agreements to maintain the confidentiality of the Company's trade secrets and
proprietary information, will effectively prevent disclosure of the Company's
confidential information or provide meaningful protection for the Company's
confidential information if there is unauthorized use or disclosure, or that
technology similar to the Company's will not be independently developed by the
Company's competitors. In addition, the Company is the exclusive perpetual
worldwide licensee of certain patented technology from DEKA for use in the field
of cytology related to the fluid pumping system used in the ThinPrep System. The
Company is obligated to pay royalties equal to 1% of net sales of the ThinPrep
Processor, filter cylinder disposable products which are used in the ThinPrep
System, and improvements made by the Company relating to such items. The license
provides that it may only be terminated (1) by mutual written consent of both
parties or (ii) by DEKA on written notice to the Company in the event that the
license is assigned to other than a single acquiror without the consent of DEKA.
Failure by the Company to maintain rights to such technology could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company also holds unregistered copyrights on
documentation and operating software developed by it for the ThinPrep System.
The Company presently has several trademarks, some of which have been registered
with the United States Patent and Trademark Office. There can be no assurance
that any copyrights or trademarks owned by the Company will provide competitive
advantages for the Company's products or will not be challenged or circumvented
by its competitors.

     Litigation may be necessary to defend against claims of infringement, or
to enforce patents, copyrights, trademarks or trade secrets of the Company
which could result in substantial cost to, and diversion of effort by, the
Company. (See "Legal Proceedings".) In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent as
do the laws of the United States.

Competition

     The development, FDA approval and commercial marketing of competing
systems for cervical cancer screening could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company faces direct competition from a number of publicly-traded and
privately-held companies, including other manufacturers of thin layer slide
preparation systems. Many of the Company's existing and potential competitors
have substantially greater financial, marketing, sales, distribution and
technical resources than the Company, and more experience in research and
development, clinical trials, regulatory matters, manufacturing and marketing.
In addition, many of these companies may have established third-party
reimbursement for their products. Several established medical device
manufacturers produce thin layer slide preparation systems for use in
non-gynecological testing applications, at least one of which has achieved
brand-name recognition and significant penetration in the non-gynecological
cytology market. In June 1999, AutoCyte, Inc., a competitor of the Company,
received FDA approval to market its slide preparation system. In September
1999, AutoCyte, Inc. effected a merger with NeoPath, Inc., another competitor
of the Company and a company that has received FDA approval for a computer
imaging system for primary screening of Pap smears. The combined company was
renamed TriPath Imaging, Inc. In addition to direct competition, the Company
faces indirect competition from companies which currently market imaging
systems to initially evaluate conventional pap smears (primary screening
method) or to reexamine or rescreen conventional Pap smears previously
diagnosed as negative. The Company believes that these systems, as currently
sold, could not be used with the ThinPrep System, and, therefore, if such
systems are installed at or used by hospitals and reference laboratories, the
Company's ability to market its products to such hospitals and laboratories
could be materially adversely affected.

                                      14

<PAGE>

     The medical device industry is characterized by rapid product development
and technological advances. The Company's products could be rendered obsolete
or uneconomical by the introduction and market acceptance of competing
products, by technological advances of the Company's current or potential
competitors or by other approaches.

     The Company competes on the basis of a number of factors, including
manufacturing efficiency, marketing and sales capabilities and customer service
and support. There can be no assurance that the Company will be able to compete
successfully against current or future competitors or that competition,
including the development and commercialization of new products and technology,
will not have a material adverse effect on the Company's business, financial
condition or results of operations.

Employees

     As of December 31, 2001, the Company employed 554 persons. The Company is
not subject to any collective bargaining agreements, has never experienced a
work stoppage and considers its relations with its employees to be good.

Item 2.  Properties

     The Company's executive offices and manufacturing operations are located
in Boxborough, Massachusetts in a leased facility consisting of approximately
97,000 square feet. The lease of this facility has a term of seven years
beginning November 1997, with an option to extend the term for an additional
five years. In January 2000, as part of its acquisition of Acu-Pak, a contract
packager in Londonderry, New Hampshire, the Company acquired approximately 2.7
acres of land and facilities. In November 2001, as part of its acquisition of
Pro Duct, a manufacturer of medical devices in Menlo Park, California, the
Company entered into a lease for a facility consisting of approximately 35,000
square feet. The lease of this facility terminates on April 30, 2003. The
Company has subleased approximately 17,000 square feet of office space in Menlo
Park, California to a third party for eighteen months ending April 30, 2003. In
connection with the acquisition, the Company has committed to a plan to abandon
the leased facilities. The Company has accrued approximately $787,000 for the
abandonment of the leased facility, representing the present value of future
minimum lease payments less estimated sub-lease receipts. The Company believes
that its facilities in Massachusetts and New Hampshire will satisfy its
operational requirements for the foreseeable future.

Item 4.  Submission of Matters to a Vote of Security Holders

     There were no matters submitted to a vote of security holders of the
Company during the fourth quarter of the year ended December 31, 2001.


                                      15

<PAGE>

                                   PART II

Item 5. Market for Registrant's Common Equity and Related Security Holder
        Matters

     The Company's Common Stock is traded on The Nasdaq Stock Market under the
symbol "CYTC". The following table sets forth, for the calendar periods
indicated, the range of high and low sale prices for the Common Stock of the
Company on The Nasdaq Stock Market, as adjusted to reflect both the two-for-one
stock split in the form of a stock dividend paid in January 2000 to holders of
record of the Company's Common Stock on January 14, 2000 and the three-for-one
stock split in the form of a stock dividend paid in March 2001 to holders of
record of the Company's Common Stock on February 16, 2001. These prices do not
include retail mark-up, mark-down or commissions and may not represent actual
transactions.

<TABLE>
<CAPTION>
                                                         High             Low
                                                       --------         -------
     <S>                                                <C>           <C>
     2000:
         First Quarter...............................   $ 19.25       $  7.94
         Second Quarter..............................     22.58          9.83
         Third Quarter...............................     23.48         11.25
         Fourth Quarter..............................     22.38         12.67
     2001:
         First Quarter...............................   $ 22.67       $ 13.63
         Second Quarter..............................     26.03         14.50
         Third Quarter...............................     27.01         18.67
         Fourth Quarter..............................     30.22         21.65
     2002:
         First Quarter (through February 15, 2002)...   $ 26.49       $ 19.24
</TABLE>

     On February 15, 2002, the last reported sales price of the Common Stock on
the Nasdaq National Market was $20.73 per share. As of February 15, 2002, there
were approximately 533 holders of record of the Common Stock.

     The Company has never declared or paid cash dividends. The Company
currently intends to retain any earnings for use in its business and does not
anticipate paying any cash dividends on its capital stock in the foreseeable
future.

     In December 1999, the Company's Board of Directors approved a two-for-one
split of the Company's Common Stock. Payable in the form of a 100 percent stock
dividend, all stockholders of record at the close of business on January 14,
2000 received one additional share of Common Stock for each share owned. The
additional shares were distributed to stockholders on or about January 31,
2000. In January 2001, the Company's Board of Directors approved a
three-for-one split of the Company's Common Stock. Payable in the form of a 200
percent stock dividend, all stockholders of record at the close of business on
February 16, 2001 received two additional shares of Common Stock for each share
owned. The additional shares were distributed to stockholders on or about March
2, 2001. All share numbers contained in this report on Form 10-K and the
computations of basic and diluted net income (loss) per common share have been
adjusted for all periods presented to reflect both the two-for-one and
three-for-one stock splits.

     On January 1, 2000, the Company issued to Quest a warrant to purchase up
to 900,000 shares of the Company's Common Stock at an exercise price equal to
$10.14 per share. The warrant was issued in consideration of entering into a
multi-year joint-marketing agreement. No underwriter was involved in the
issuance of the warrant. On June 6, 2001, Quest exercised the warrant in full
pursuant to the cashless exercise feature and the Company issued Quest 494,400
shares of the Company's Common Stock. Such issuance was made by the Company in
reliance upon an exemption from the registration provisions of the Securities
Act of 1933 set forth in Section 4(2) thereof as a transaction by an issuer not
involving a public offering.

                                      16

<PAGE>

     On November 30, 2001, the Company completed the acquisition of Pro Duct, a
privately-held company that has developed a proprietary ductal lavage device for
the early detection of breast cancer. The Company acquired all of the
outstanding securities of Pro Duct by means of a forward triangular merger
pursuant to which Pro Duct was merged with and into Cytyc Health Corporation, a
wholly-owned subsidiary of the Company, with Cytyc Health Corporation surviving
the merger and continuing in existence as a wholly-owned subsidiary of the
Company.

     In connection with the Company's acquisition of Pro Duct, the Company
issued an aggregate of 5,000,000 shares of the Company's common stock and $38.5
million in cash in exchange for all of the outstanding capital stock and vested
options and warrants of Pro Duct. The Company also assumed all outstanding
options to acquire Pro Duct common stock. No underwriters were involved in the
Company's issuance of common stock to the Pro Duct securityholders, which was
made by the Company in reliance upon an exemption from the registration
provisions of the Securities Act of 1933 set forth in Section 4(2) thereof as a
transaction by an issuer not involving a public offering.

Item 6.   Selected Consolidated Financial Data

     The selected consolidated financial data set forth below for each of the
years ended December 31, 1999, 2000 and 2001 and at December 31, 2000 and 2001
are derived from consolidated financial statements of the Company audited by
Arthur Andersen LLP, independent public accountants, which are included
elsewhere herein. The consolidated selected financial data for the years ended
December 31, 1997 and 1998 and at December 31, 1997, 1998 and 1999 are derived
from consolidated financial statements of the Company audited by Arthur
Andersen LLP which are not included herein. The selected consolidated financial
data set forth below should be read in conjunction with the consolidated
financial statements and related notes thereto and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this report.

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                             --------------------------------------------------
                                                               1997      1998      1999       2000       2001
                                                             --------  -------   --------   --------   --------
Statements of Operations Data:                                    (in thousands, except per share data)
<S>                                                         <C>       <C>       <C>        <C>        <C>
Net sales...............................................    $ 26,347  $ 44,264  $  81,100  $ 142,065  $ 220,993
Cost of sales...........................................       8,006    11,211     15,815     24,565     40,168
                                                            --------  --------  ---------  ---------  ---------
     Gross profit.......................................      18,341    33,053     65,285    117,500    180,825
                                                            --------  --------  ---------  ---------  ---------
Operating expenses:
     Research and development...........................       6,048     8,419     13,372     14,171     18,975
     In-process research and development................           -         -          -          -     56,000
     Sales and marketing................................      31,761    35,332     44,017     55,162     59,161
     General and administrative.........................       7,746     8,372      6,765     13,872     16,987
                                                            --------  --------  ---------  ---------  ---------
       Total operating expenses.........................      45,555    52,123     64,154     83,205    151,123
                                                            --------  --------  ---------  ---------  ---------
Income (loss) from operations...........................     (27,214)  (19,070)     1,131     34,295     29,702
Other income, net.......................................       5,142     7,341      4,639      4,721      8,006
                                                            --------  --------  ---------  ---------  ---------
Income (loss) before provision for income taxes.........     (22,072)  (11,729)     5,770     39,016     37,708
Provision for income taxes..............................          --         -        130        853     25,073
                                                            --------  --------  ---------  ---------  ---------
Net income (loss).......................................    $(22,072) $(11,729) $   5,640  $  38,163  $  12,635
                                                            ========  ========  =========  =========  =========
Net income (loss) per common and potential common
share (1):
     Basic..............................................    $  (0.22) $  (0.11) $    0.05  $    0.34  $    0.11
                                                            ========  ========  =========  =========  =========
     Diluted............................................    $  (0.22) $  (0.11) $    0.05  $    0.32  $    0.10
                                                            ========  ========  =========  =========  =========
Weighted average common and potential common
shares outstanding (1):
     Basic..............................................     101,358   105,858    107,346    110,754    115,396
     Diluted............................................     101,358   105,858    112,530    117,960    120,776

<CAPTION>
Balance Sheet Data:                                           1997      1998       1999       2000       2001
                                                            --------  --------  ---------   --------  ---------
<S>                                                         <C>       <C>       <C>         <C>       <C>
Cash, cash equivalents and short-term investments.......    $ 85,402  $ 69,908  $  70,368   $ 88,845  $ 153,242
Total assets............................................     108,377    97,737    112,328    170,886    386,760
Accumulated deficit.....................................     (69,179)  (80,908)   (75,268)   (37,105)   (24,470)
Total stockholders' equity..............................      96,187    85,807     94,991    147,046    350,308
</TABLE>

                                      17

<PAGE>

(1)   See Note 2 in the notes to the consolidated financial statements for an
      explanation of the computation of basic and diluted per share data.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Overview

     The Company designs, develops, manufactures and markets a sample
preparation system for medical diagnostic applications. The ThinPrep System
consists of the Thin Prep Processor, and related disposable reagents, filters
and other supplies. The Company has marketed the ThinPrep System for use in
non-gynecological testing applications since 1991. On May 20, 1996, the Company
received PMA approval from the FDA to market the ThinPrep System for cervical
cancer screening as a replacement for the conventional Pap smear method. On
November 6, 1996, the FDA cleared expanded product labeling for the ThinPrep
System to include the claim that the ThinPrep System is significantly more
effective in detecting low grade and more severe lesions than the conventional
Pap smear method in a variety of patient populations. The expanded labeling
also indicates that the specimen quality using the ThinPrep System is
significantly improved over that of the conventional Pap smear method. On
February 25, 1997, the FDA approved the Company's supplemental PMA application
for use of a combination of an endocervical brush and spatula sampling devices,
which is a commonly used method of collecting samples for conventional Pap
smears.

     On September 4, 1997, the FDA approved the Company's supplemental PMA
application for the testing for HPV directly from a single vial of patient
specimen collected in ThinPrep solution using the Hybrid Capture HPV DNA Assay
of Digene. In March 1999, the FDA approved the use of Digene's Hybrid Capture
II HPV DNA Assay from a single vial of patient specimen collected in ThinPrep
solution.

     The Company commenced the full-scale commercial launch of the ThinPrep
System for cervical cancer screening in the United States in 1997 and in
selected international markets in 1998. In May 2000, the FDA approved the
ThinPrep (R) 3000 Processor, the Company's next-generation processor for
automated sample preparation. In August 2001, the FDA approved the Company's
PMA Supplement Application for the inclusion of data describing the detection
of High-Grade Squamus Intraepithelial Lesions (HSIL) with the ThinPrep Pap
Test. In December 2001, the Company submitted a supplemental PMA application to
the FDA to allow for testing for Chlamydia Trachomatis (CT) and Neisseria
Gonorrhea (NG) directly from the ThinPrep Pap Test vial using RDC's COBAS
Amplicor(tm) automated system. In January 2002, the Company submitted a PMA
Application to the FDA for the ThinPrep Imaging System to aid in cervical
cancer screening.

     Prior to 2000, the Company incurred substantial losses, principally from
expenses associated with obtaining FDA approval of the Company's ThinPrep
System for cervical cancer screening, engineering and development efforts
related to the ThinPrep 2000 Processor, ThinPrep 3000 Processor, and ThinPrep
Imaging System, expansion of the Company's manufacturing facilities, and the
establishment of a marketing and sales organization. The Company may experience
losses in the future as it expands its domestic and international marketing and
sales activities and continues its product development efforts. The operating
results of the Company have fluctuated significantly in the past on an annual
and a quarterly basis. The Company expects that its operating results may
fluctuate significantly from quarter to quarter in the future depending on a
number of factors, including the extent to which the Company's products
continue to gain market acceptance, the rate and size of expenditures incurred
as the Company expands its domestic and establishes its international sales and
distribution networks, the timing and level of reimbursement for the Company's
products by third-party payors, and other factors, many of which are outside
the Company's control.

     The Company occupies a 97,000 square foot facility in Boxborough,
Massachusetts. The Company has installed automated customized equipment for the
high-volume manufacture of disposable filters for use in connection with the
ThinPrep System. In January 2000, the Company acquired approximately 2.7 acres
of land and facilities of Acu-Pak, a contract packager in Londonderry, New
Hampshire that was manufacturing, filling vials containing and distributing the
Company's solutions for all of its ThinPrep line of products, for approximately
$6.0 million in cash.

                                      18

<PAGE>

The Company accounted for the acquisition as a purchase. In November 2001, as
part of its acquisition of Pro Duct, a manufacturer of medical devices in Menlo
Park, California, the Company entered into a lease for a facility consisting of
approximately 35,000 square feet. The lease of this facility terminates on
April 30, 2003. The Company has subleased approximately 17,000 square feet of
office space in Menlo Park, California to a third party for eighteen months
ending April 30, 2003. In connection with the acquisition, the Company has
committed to a plan to abandon the leased facilities. The Company has accrued
approximately $787,000 for the abandonment of the leased facility, representing
the present value of future minimum lease payments less estimated sub-lease
receipts.

     The cost per ThinPrep(R) Pap Test(TM), plus a laboratory mark-up, is
generally billed by laboratories to third-party payors and results in a higher
amount for the ThinPrep Pap Test than the current billing for conventional Pap
tests. Successful sales of the ThinPrep System for cervical cancer screening in
the United States and other countries will depend on the availability of
adequate reimbursement from third-party payors such as private insurance plans,
managed care organizations and Medicare and Medicaid. Although many health
insurance companies have added the ThinPrep Pap Test to their coverage, there
can be no assurance that third-party payors will provide or continue to provide
such coverage, that reimbursement levels will be adequate or that health care
providers or clinical laboratories will use the ThinPrep System for cervical
cancer screening in lieu of the conventional Pap smear method.

     Since January 1, 1998, the Company's laboratory customers have been able
to request reimbursement for the ThinPrep Pap Test from health insurance
companies and the Center for Medicare and Medicaid Services ("CMS") using a
newly assigned Common Procedure Technology ("CPT") code specifically for
liquid-based monolayer cervical cell specimen preparation. CPT codes are
assigned, maintained and revised by the CPT Editorial Board, which is
administered by the American Medical Association, and are used in the
submission of claims to third-party payors for reimbursement for medical
services. CMS has established a national fee of $28 for the CPT codes
describing the ThinPrep Pap Test. This reimbursement level is nearly double the
level of reimbursement for the conventional Pap smear.

     The Company's direct sales force is actively working with current
laboratory customers and health insurance companies to facilitate reimbursement
under the CPT code. As of December 31, 2001, based on information provided to
the Company, the Company believes that all of the 367 health insurance
companies which announced coverage of the ThinPrep Pap Test have implemented
the new CPT code and have established a reimbursement amount. There are
approximately six hundred managed care organizations and other third party
payors in the United States. There can be no assurance, however, that
reimbursement levels under the new CPT code will be adequate.

     The Company expects to continue its significant expenditures for sales and
marketing activities of the ThinPrep System for cervical cancer screening and
the ductal lavage device acquired from Pro Duct in 2002.

     In January 2000, the Company entered into a supply and co-marketing
agreement with Quest to market the ThinPrep Pap Test as Quest's exclusive
liquid-based cervical cancer screening methodology.

     In October 2000, the Company entered into an agreement with RDC, exclusive
in the United States and Puerto Rico, to co-promote the benefits of testing for
chlamydia and gonorrhea using RDC's COBAS(R) AMPLICOR(R) CT/NG Test directly
from the ThinPrep collection vial. The companies also intend to explore the
potential for collaborating on a portfolio of additional screening and
diagnostic tests based on the companies' respective technologies.

     In January 2001, the Company entered into an agreement with Digene,
exclusive in the United States and Puerto Rico, to co-promote the benefits of
testing for human papillomavirus (HPV) using Digene's Hybrid Capture(R) II HPV
DNA Assay directly from the ThinPrep collection vial. The companies expect that
the co-promotion program will initially focus on promoting Digene's HPV DNA
test, using the residual material in ThinPrep collection vials, as the optimal
patient management strategy for borderline cytology results.

                                      19

<PAGE>

     The Company expects to increase its expenditures in 2002 for research and
development to fund development of the ductal lavage device acquired from Pro
Duct, as well as follow-on products and additional applications of ThinPrep
technology.

Recent Acquisitions

     In October 2001, the Company announced that it had entered into a
definitive merger agreement to acquire all of the outstanding securities of Pro
Duct, a privately held company that has developed a ductal lavage device to
enhance the evaluation of risk for breast cancer. In November 2001, the Company
completed its acquisition of Pro Duct by means of a merger of Pro Duct with and
into Cytyc Health Corporation, a wholly-owned subsidiary of Cytyc Corporation.
The Company intends to market the ductal lavage device as the ThinPrep Breast
Test(TM), subject to required regulatory approvals.

     On February 19, 2002, the Company announced that it had signed a definitive
merger agreement to acquire all of the outstanding securities of Digene in an
exchange offer transaction. If the acquisition is consummated, the Company will
issue approximately 23 million shares of common stock and pay $76.9 million in
cash for the outstanding equity of Digene (calculated on a fully diluted basis
using the treasury stock method). The Company also will assume all options to
acquire Digene common stock that are outstanding as of the closing of the merger
that follows the tender offer. The acquisition is structured as a tax-free
reorganization.

     The closing of the exchange offer is subject to the tender of over 50
percent of Digene's outstanding securities, regulatory approval, and other
customary closing conditions. Although the Company expects that its acquisition
of Digene will close during the second quarter of 2002, the Company may not be
able to complete the acquisition during the second quarter, or at all.

In Process Research and Development

     The Company incurred in-process research and development charges totaling
approximately $56.0 million in 2001. These charges related to the acquisition
of Pro Duct. The Company determined these valuations giving explicit
consideration to the Securities and Exchange Commission's views on purchased
in-process research and development as set forth in its September 9, 1998
letter to the American Institute of Certified Public Accountants SEC
Regulations Committee (the "AICPA Letter"). These valuations were further based
upon appraisals prepared by an independent appraiser experienced in evaluating
in-process research and development. A description of the valuation methodology
and assumptions used in those valuations are set forth below.

     As part of the purchase price allocation, all intangible assets that are
a part of the merger were identified and valued. It was determined that
technology assets had value. As a result of this identification and valuation
process, the Company allocated approximately $56.0 million of the purchase
price to in-process research and development projects. This allocation
represented the estimated fair value based on risk-adjusted cash flows related
to the incomplete research and development related primarily to three projects.
At the date of acquisition, the development of these projects had not yet
reached technology feasibility and the research and development in progress had
no alternative future uses. Accordingly, these costs were charged to expense as
of the date of the merger.

     In making purchase price allocation, management considered present value
calculations of income, an analysis of project accomplishments and remaining
outstanding items, an assessment of overall contributions, as well as project
risks. The value assigned to purchased in-process research and development was
determined by estimating the costs to develop the acquired technology into
commercially viable products, estimating the resulting net cash flows from the
projects, and discounting the net cash flows to their present value. The
revenue projection used to value the in-process research and development was
based on estimates of relevant market sizes and growth factors, expected trends
in technology, and the nature and expected timing of new product introductions
by the Company and its competitors. The resulting net cash flows from such
projects are based on management's estimates of cost of sales, operating
expenses, and income taxes from such projects.

                                      20

<PAGE>

     Aggregate revenues for Pro Duct were estimated to grow at a compounded
annual growth rate of approximately 111% for the five years following the
acquisition, assuming the successful completion and market acceptance of the
major research and development programs.

     The rates utilized to discount the net cash flows to their present value
were based on estimated weighted average cost of capital calculations. Due to
the nature of the forecast and the risks associated with the development
projects, a range of discount rates of 25% to 30% were used for the in-process
research and development. The discount rate utilized was higher than the
Company's weighted average cost of capital due to the inherent uncertainties
surrounding the successful development of the purchased in-process technology,
the useful life of such technology, the profitability levels of such
technology, and the uncertainty of technological advances that are unknown at
this time.

     Due to the very short lapse of time from the date of acquisition to
December 31, 2001 the Company has not revised any estimates or assumptions made
above. However, the Company is constantly reviewing the allocation of its
research and development resources to respond to the ever changing market and
technology developments, as well as developments of internally developed and
acquired evolving technology portfolio.

     As of December 31, 2001 expenditures incurred and estimates to complete
the acquired in-process projects are consistent with the Company's
expectations. If the Company is not successful in implementing its projects, it
may be unable to realize the value assigned to this in-process technology. In
addition, the value of the other acquired intangible assets associated with
this technology may also become impaired.

Critical Accounting Policies

     In December 2001, the SEC requested that all registrants list their most
"critical accounting policies" in MD&A. The SEC indicated that a "critical
accounting policy" is one which is both important to the portrayal of the
company's financial condition and results and requires management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.
Management believes that the following accounting policies fit this definition:

     Revenue recognition. The Company's revenue recognition policy is
significant because revenue is a key component of the Company's results of
operations. The Company follows very specific and detailed guidelines in
measuring revenue; however, certain judgments affect the application of its
revenue policy. For example, revenue is not recognized from sales transactions
unless the collection of the resulting receivable is reasonably assured. The
Company assess collection based on a number of factors, including past
transaction history with the customer and the credit-worthiness of the customer.
If it is determined that the collection of a fee is not reasonably assured, the
fee is deferred and revenue is recognized at the time collection becomes
reasonably assured, which is generally upon receipt of cash. Revenue results are
difficult to predict, and any shortfall in revenue or delay in recognizing
revenue could cause our operating results to vary significantly from quarter to
quarter.

     Valuation of Long-Lived Assets and Deferred Taxes. The Company assess the
impairment of identifiable intangibles, long-lived assets and goodwill whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. If it is determined that the carrying value of intangible,
long-lived assets and goodwill might not be recoverable based upon the existence
of one or more indicators of impairment, the Company would measure any
impairment based on a projected discounted cash flow method. No such impairment
charges have been recorded to date. In 2002, Statement of Financial Accounting
Standards ("SFAS") No. 142 "Goodwill and Other Intangible Assets" became
effective and as a result, the Company will cease to amortize goodwill. In lieu
of amortization, the Company is required to perform an initial impairment of our
goodwill in 2002 and an annual impairment review thereafter. The Company
currently does not expect to record an impairment charge upon completion of the
initial impairment review. However, there can be no assurance that at the time
the review is completed a material impairment charge will not be recorded.
Carrying value of the Company's net deferred tax assets assumes that the Company
will be able to generate sufficient future taxable income in certain tax
jurisdictions, based on estimates and assumptions. If these estimates, and
related assumptions change in the future, the Company may be required to record
additional valuation allowances against its deferred tax assets resulting in
additional income tax expense in the Company's consolidated statement of
operations.

     Accounts Receivable Reserve. The Company performs ongoing credit
evaluations of its customers and adjusts credit limits based upon payment
history and the customer's credit worthiness, as determined by its review of
their current credit information. The Company continuously monitor collections
and payments from its customers and maintain a provision for estimated credit
losses based upon our historical experience and any specific customer collection
issues that have been identified. While such credit losses have historically
been within the Company's expectations and the provisions established, it cannot
guarantee that it will continue to experience the same credit loss rates that it
has in the past.

     The above list is not intended to be a comprehensive list of all of our
accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by generally accepted accounting
principles, with no need for management's judgment in their application. There
are also areas in which management's judgment in selecting any available
alternative would not produce a materially different result. See the Company's
audited consolidated financial statements and notes thereto which begin on page
F-1 which contain accounting policies and other disclosures required by
generally accepted accounting policies.

Results of Operations

  Years Ended December 31, 2001 and December 31, 2000

     Net sales increased to $221.0 million in 2001 from $142.1 million in 2000,
an increase of 55.6%. This increase was primarily due to increased sales of the
Company's ThinPrep Pap Test for cervical cancer screening in the United States.
Gross profit increased to $180.8 million in 2001 from $117.5 million in 2000,
an increase of 53.9%, however the gross margin decreased as a percentage of net
sales to 81.8% in 2001 from 82.7% in 2000. Management attributes the decrease
in gross margin in 2001 primarily to customer mix.

     Total operating expenses increased to $151.1 million in 2001 from $83.2
million in 2000, an increase of 81.6%. Excluding a one-time charge of $56.0
million for in-process research and development related to the Company's
acquisition of Pro Duct in November 2001, total operating expenses increased
14.3%. Research and development costs increased to $19.0 million in 2001,
excluding a one-time charge of $56.0 million for in-process research and
development related to the Pro Duct acquisition, from $14.2 million in 2000, an
increase of 33.9%, primarily as a result of engineering costs, additional
personnel expenses and clinical trial costs associated with the Company's
ThinPrep Imaging System development activities. Sales and marketing costs
increased to $59.2 million in 2001 from $55.2 million in 2000, an increase of
7.2%. The increase primarily relates to personnel costs, including commissions,
increased regional meetings and marketing programs. The Company expects that
sales and marketing costs will increase in succeeding quarters as a result of
increased expenditure for personnel, marketing programs and commissions
expense, all of which increase with sales. General and administrative costs
increased to $17.0 million in 2001 from $13.9 million in 2000, an increase of
22.5%, primarily due to a combination of increased personnel costs and
professional fees, including those related to business development activities
of Cytyc Healthcare Ventures, LLC, partially offset by decreased litigation
expenses. Interest income increased to $5.4 million in 2001 from $4.7 million
in 2000, an increase of 14.3%, due to an increase in the average cash balance
available for investment. The Company recorded $3.1 million in 2001 as other
income relating to the settlement of certain litigation. The Company also
recorded approximately $16,000 and $192,000 in foreign currency transaction
losses in 2000 and 2001, respectively.

                                      21

<PAGE>

    Years Ended December 31, 2000 and December 31, 1999

     Net sales increased to $142.1 million in 2000 from $81.1 million in 1999,
an increase of 75.2%. This increase was primarily due to increased sales of the
Company's ThinPrep Pap Test for cervical cancer screening in the United States.
Gross profit increased to $117.5 million in 2000 from $65.3 million in 1999, an
increase of 80.0%, and the gross margin increased to 82.7% in 2000 from 80.5%
in 1999. Management attributes the increase in gross margin in 2000 primarily
to increased sales of the higher gross margin ThinPrep Pap Test in the United
States compared to domestic sales of the ThinPrep Processor or international
sales of either tests or processors.

     Total operating expenses increased to $83.2 million in 2000 from $64.2
million in 1999, an increase of 29.7%. Research and development costs increased
to $14.2 million in 2000 from $13.4 million in 1999, an increase of 6.0%,
primarily as a result of engineering costs and additional personnel expenses
associated with the Company's ThinPrep Imaging System development activities.
Sales and marketing costs increased to $55.2 million in 2000 from $44.0 million
in 1999, an increase of 25.3%. The increase primarily related to personnel
costs in domestic sales and marketing, including commissions, travel and
meetings expense, marketing medical education programs in the United States and
the expansion of international sales and marketing. The Company expects that
sales and marketing costs will increase in succeeding quarters as a result of
increased expenditure for personnel, marketing programs and commissions
expense, all of which increase with sales. General and administrative costs
increased to $13.9 million in 2000 from $6.8 million in 1999, an increase of
105.1%, due to increased legal expenses associated with litigation and
increased personnel costs and professional fees. During the third quarter of
1999, the Company revised its estimate and reversed approximately $700,000 in
legal expenses which had been accrued for certain litigation which was
favorably settled during the second quarter of 1999, with all related efforts
and costs completed in the third quarter. Excluding the reversal, general and
administrative expenses would have increased 85.8%. Interest income increased
to $4.7 million in 2000 from $3.8 million in 1999, an increase of 24.9%, due to
an increase in the average cash balance available for investment and higher
average interest rates. The Company recorded $1.1 million in 1999 as other
income relating to the settlement of certain litigation. The Company also
recorded approximately $292,000 and $16,000 in foreign currency transaction
losses in 1999 and 2000, respectively.

Liquidity and Capital Resources

     Since inception, the Company's expenses have significantly exceeded its
revenue, resulting in an accumulated deficit of $24.5 million as of December
31, 2001. Although the Company generated cash of $31.9 million and $10.3
million in 2000 and 2001, respectively, the Company had previously funded its
operations primarily through the private placement and public sale of equity
securities and exercise of stock options and warrants aggregating $194.6
million, net of offering expenses. At December 31, 2001, the Company had cash,
cash equivalents and short-term investments of $153.2 million. Cash provided by
the Company's operations was $1.7 million, $25.9 million and $91.7 million
during 1999, 2000 and 2001, respectively, primarily as a result of net income
generated in each period, partially offset by increases in working capital for
each year. In 2001, cash provided by operations was primarily the result of net
income, as adjusted for non cash items including deferred taxes and the charge
related to acquired in process research and development, partially offset by
increase in net working capital items, especially an increase in accounts
receivable. Net accounts receivable increased by $10.1 million to approximately
$50.3 million during 2001 as a result of significant sales growth in 2001. Net
inventories decreased approximately $0.4 million from December 31, 2000 to
December 31, 2001 due primarily to improved inventory management and production
control.

     The Company's investing activities used cash of approximately $9.2
million, $2.5 million and $90.2 million during 1999, 2000 and 2001,
respectively. The Company's investing activities included capital expenditures
for the years ended December 31, 1999, 2000 and 2001 of $3.8 million, $10.8
million and $9.3 million, respectively. The Company's investing activities
utilized cash of approximately $4.5 million for the purchase of short-term
investments in 1999 and generated cash of approximately $13.5 million from the
sale of short-term investments during 2000. The Company's investing activities
also utilized $25.8 million in cash to acquire Pro Duct and $54.0 million to
purchase short-term investments during 2001.

                                      22

<PAGE>

     The Company's financing activities generated cash of approximately $3.6
million, $9.1 million and $9.8 million in 1999, 2000 and 2001, respectively. The
Company's financing activities consisted primarily of proceeds from the exercise
of common stock options and warrants of approximately $3.3 million, $8.4 million
and $8.7 million during 1999, 2000 and 2001, respectively.

     The Company leases its facilities under non-cancelable operating leases
which have expiration dates ranging from 2002 through 2011. At December 31,
2001, future minimum annual lease payments amount to $7.4 million under these
leases.

     The Company's future liquidity and capital requirements will depend upon
numerous factors, including the resources required to further develop its
marketing and sales capabilities, both domestic and international, the extent to
which such activities generate market acceptance and demand for the ThinPrep
System for cervical cancer screening and additional applications of its ThinPrep
technology, including the ductal lavage device acquired from Pro Duct. The
Company's liquidity and capital requirements will also depend upon the progress
of the Company's research and development programs to develop follow-on products
including the ThinPrep Imaging System and the ductal lavage device acquired from
Pro Duct, the receipt of and the time required to obtain regulatory clearances
and approvals, and the resources the Company devotes to developing,
manufacturing and marketing its products. In addition, the Company's capital
requirements will depend on the extent of potential liabilities, if any, and
costs associated with any future litigation. There can be no assurance that the
Company will not require additional financing or will not in the future seek to
raise additional funds through bank facilities, debt or equity offerings or
other sources of capital. Additional funding may not be available when needed or
on terms acceptable to the Company, which would have a material adverse effect
on the Company's business, financial condition and results of operations.

Income Taxes

     The Company has net operating loss and research and development tax credit
carryforwards for federal income tax purposes of approximately $45.2 million and
$7.8 million, respectively, at December 31, 2001 that will expire at various
dates through the year 2020, if not utilized. The Company has an Alternative
Minimum Tax ("AMT") tax credit carryforward for federal income tax purposes of
approximately $1.0 million.

     The net operating loss and research and development tax credit
carryforwards are subject to review by the Internal Revenue Service. Ownership
changes, as defined in the Internal Revenue Code, may limit the amount of these
tax attributes that can be utilized annually to offset future taxable income or
tax liabilities. The amount of the annual limitation is determined based on the
value immediately prior to the ownership change. Subsequent ownership changes
may further affect the limitation in future years.

     The Company's effective tax rate was 1.1% and 2.1% in 1999 and 2000,
respectively, which was less than the then current combined federal and state
statutory rates. This difference was caused primarily by utilization of the
Company's net operating loss carryforwards. The Company's effective tax rate
for 2001 was 66.5% which was higher than the then current combined federal and
state statutory rate. This was caused primarily by the non deductible in process
research and development charge related to the Pro Duct acquisition, partially
offset by utilization of the Company's net operating loss carryforwards.

Quantitative and Qualitative Disclosures About Market Risk

     Derivative Financial Instruments, Other Financial Instruments, and
Derivative Commodity Instruments. The Company does not participate in
derivative financial instruments, other financial instruments for which the
fair value disclosure would be required under SFAS No. 107, or derivative
commodity instruments. All of the Company's investments are in short-term,
investment-grade commercial paper, corporate bonds and U.S. Government and
agency securities that are carried at fair value on the Company's books.
Accordingly, the Company has no quantitative information concerning the market
risk of participating in such investments.

     Primary Market Risk Exposures. The Company's primary market risk exposures
are in the areas of interest rate risk and foreign currency exchange rate risk.
The Company's investment portfolio of cash equivalents is subject to interest
rate fluctuations, but the Company believes this risk is immaterial due to the
short-term nature of these investments. The Company's business outside the
United States is conducted in local currency transactions. The Company has no
foreign exchange contracts, option contracts, or other foreign hedging
arrangements. However, the Company estimates that any market risk associated
with its foreign operations is not significant and is unlikely to have a
material adverse effect on the Company's business, financial condition or
results of operations.

Certain Factors Which May Affect Future Results

     The forward looking statements in this Form 10-K are made under the safe
harbor provisions of Section 21E of the Securities Exchange Act of 1934, as
amended. The Company's operating results and financial condition have varied
and may in the future vary significantly depending on a number of factors.
Statements in this Form 10-K

                                      23

<PAGE>

which are not strictly historical statements, including, without
limitation, statements regarding management's expectations for future growth
and plans and objectives for future management and operations, domestic and
international marketing and sales plans, product plans and performance,
potential savings to the healthcare system, management's assessment of market
factors, statements concerning the integration of Pro Duct, statements
concerning the acquisition of Digene, as well as statements regarding the
strategy and plans of the Company, constitute forward-looking statements that
involve risks and uncertainties. The following factors, among others, could
cause actual results to differ materially from those contained in
forward-looking statements made in this report and presented elsewhere by
management from time to time. Such factors, among others, may have a material
adverse effect upon the Company's business, financial condition, and results of
operations.

     The following discussion of the Company's risk factors should be read in
conjunction with the consolidated financial statements and related notes
included herein. Because of these and other factors, past financial performance
should not be considered an indication of future performance.

We depend principally on the sale of a single product.

     To date, we have derived most of our revenues from sales of our ThinPrep
2000 Processor, related instruments, filters, and other supplies for use in
gynecological and non-gynecological testing applications. If we are unable to
successfully develop and commercialize other products, our business, sales and
profits will be materially impaired. Although we have begun marketing our
next-generation ThinPrep 3000 Processor and we have submitted a PMA application
to the FDA for approval to sell our ThinPrep Imaging System, neither product
has generated significant revenues yet. We cannot guarantee that the
development of our ThinPrep Imaging System will be successfully completed, or
that we will obtain necessary regulatory approval to market the ThinPrep
Imaging System in the United States or in other countries. We also cannot
guarantee that we will be able to obtain adequate reimbursement from insurance
companies and other third party payors for the ductal lavage device for the
detection of breast cancer that we obtained in our acquisition of Pro Duct, or
that we will otherwise be able to generate significant revenue from sales of
the Pro Duct device. We may be required to obtain FDA approval and secure
adequate reimbursement from insurance companies and other third party payors
for any other new products that we are able to develop or acquire, and we may
not be able to do so.

                                      24

<PAGE>

We cannot guarantee we will obtain necessary regulatory approvals for our
products.

     If we do not obtain all necessary regulatory approvals for any new products
we are able to successfully develop or acquire, our ability to generate sales
from new product offerings will materially suffer. The governments of the United
States and other countries extensively regulate the manufacture and sale of
medical diagnostic devices intended for commercial use. For example, United
States commercial sales of medical diagnostic devices require FDA approval
before selling may commence. Obtaining FDA and other required regulatory
approvals can be time-consuming, expensive and uncertain. Regulatory approval
frequently requires several years from the commencement of clinical trials to
the receipt of regulatory approval. After any approvals, we remain subject to
pervasive regulation and inspection for compliance with regulatory requirements.
In January 2002, the Company submitted a PMA Application to the FDA for the
ThinPrep Imaging System to aid in cervical cancer screening. We do not know
whether the FDA will approve these products for commercial use. We may also need
to obtain FDA approval for any other new products we are able to develop or
acquire, and we cannot guarantee that we will be able to do so.

Our success depends on the market acceptance of our products and their cost.

     Our success and growth depends primarily on market acceptance of our
ThinPrep System, including any follow-on applications of ThinPrep technology
for cervical cancer screening and any other new products we are able to
successfully develop or acquire, including the ductal lavage device we obtained
in our acquisition of Pro Duct. The laboratory cost of using the ThinPrep
System for cervical cancer screening is higher than that of a conventional Pap
smear. Due in part to increased competitive pressures in the healthcare
industry to reduce costs, our ability to gain market acceptance of the ThinPrep
System and follow-on products depends on our ability to demonstrate that the
higher cost of using the ThinPrep System is offset by a reduction in costs
often associated with conventional Pap smears, such as inaccurate diagnoses and
the need for repeat Pap tests. In particular, for all of our products,
including our ThinPrep System products and the Pro Duct ductal lavage device,
we need to convince healthcare providers, insurance companies and other third
party payors, and clinical laboratories of the clinical benefits and
cost-effectiveness of our products.

We have limited marketing and sales experience, which could cause our sales to
suffer.

     In order to effectively market our products and increase our sales and
profits, we will need to continue to increase our marketing and sales
capabilities both within the United States and in foreign countries. We
received clearance from the FDA to market our ThinPrep System for cervical
cancer screening in May 1996, and initiated full-scale marketing and sales
efforts for the ThinPrep System in the United States beginning in the first
quarter of 1997. We currently utilize both direct sales and strategic marketing
relationships with large clinical laboratories and health care companies to
market our products in the United States. We cannot guarantee that our direct
sales force or strategic marketing relationships will succeed in promoting the
ThinPrep System, or any other products we are able to develop or acquire, to
healthcare providers, third-party payors or clinical laboratories, or that we
will sufficiently establish additional marketing and sales channels. While we
are currently evaluating marketing and sales channels outside of the United
States, including contract sales organizations, distributors and marketing
partners, we have established very limited foreign sales channels. We may not
be able to establish successful marketing and distribution agreements or other
channels for sales outside of the United States. We also cannot guarantee that
we will be able to recruit and retain skilled marketing, sales, service and
support personnel for our domestic and foreign sales and marketing efforts.

Our sales are dependent on third-party reimbursement.

     We cannot sell our ThinPrep System for cervical cancer screening in the
United States and other countries unless we are able to secure adequate
reimbursement from third-party payors such as private insurance plans, managed
care organizations, and Medicare and Medicaid. Although a number of managed
care organizations in the United States have added the ThinPrep Pap Test to
their coverage, we cannot guarantee that reimbursement will increase or
continue to be available, or that reimbursement levels will be adequate to
enable healthcare providers and

                                      25

<PAGE>

clinical laboratories in the United States and other countries to use the
ThinPrep System for cervical cancer screening instead of the conventional Pap
smear method. We also will be required to secure adequate reimbursement for any
new products we develop or obtain, including the Pro Duct ductal lavage device,
and we may not be able to do so successfully.

We have a limited number of customers and a lengthy sales process to
generate new customers, which may adversely impact our sales.

     We are dependent on a relatively small number of large clinical laboratory
customers in the United States for a significant portion of our sales of the
ThinPrep System, and our business may materially suffer if we are unable to
increase sales to our existing customers and establish new customers both
within and outside the United States. Due in part to a trend toward
consolidation of clinical laboratories in recent years and the relative size of
the largest United States laboratories, it is likely that a significant portion
of ThinPrep System sales will continue to be concentrated among a relatively
small number of large clinical laboratories. To generate demand for the
ThinPrep Pap Test among clinical laboratories, we must educate physicians and
healthcare providers about the clinical benefits and cost-effectiveness of the
ThinPrep System. We also need to demonstrate the availability of adequate
levels of reimbursement for the ThinPrep Pap Test. This process requires a
lengthy sales effort, which makes it difficult and expensive for us to obtain
new customers.

We have a limited operating history.

     We have a limited operating history, which may make it difficult for you
to evaluate our business and prospects. We received initial pre-market approval
from the FDA to market our ThinPrep System as a replacement for the
conventional pap smear in May 1996 and commenced full-scale commercial launch
in the United States in 1997. Since that time, we have focused on follow-on
product development, obtaining additional regulatory approvals, expanding our
manufacturing capabilities, and establishing our marketing and sales
capabilities and channels in the United States and internationally. Our future
revenues and profitability depend significantly on our ability to successfully
market and sell the ThinPrep System and any follow-on products both within and
outside of the United States. Due in part to our limited operating history, you
should not rely on our historical results of operations as an indication of our
prospects for future revenues and profitability.

We may engage in acquisitions that may harm our operating results, dilute our
stockholders, divert management's attention from other important business
concerns, and potentially create other difficulties for us.

     On November 30, 2001, we completed the acquisition of Pro Duct, a
privately-held company that has developed an FDA approved ductal lavage device
designed to improve the evaluation of risk for breast cancer. On February 19,
2002, we signed a definitive agreement to acquire Digene by means of a stock
and cash tender offer. We may in the future pursue additional acquisitions that
we believe could provide us with new technologies, products or service
offerings, or enable us to obtain other competitive advantages.

     Acquisitions by us, including our acquisition of Pro Duct and our
acquisition of Digene (if we are able to complete it), may involve some or all
of the following financial risks:

     . use of significant amounts of cash;
     . potential dilutive issuances of equity securities;
     . incurrence of debt or amortization expenses related to certain
       intangible assets; and
     . future impairment charges related to diminished fair value of businesses
       acquired as compared to their net book value.

Such acquisitions also may involve numerous other risks, including:

     . diversion of management's attention from other business concerns;

                                      26

<PAGE>

    . difficulties associated with assimilating and integrating the personnel,
      operations and technologies of the acquired companies;
    . failure to retain key personnel;
    . loss of key customers, customer dissatisfaction or performance problems
      with the acquired company;
    . the costs associated with the integration of acquired operations; and
    . assumption of unknown liabilities.

     We may not be successful in overcoming the risks described above or any
other problems associated with our acquisition of Pro Duct or any other
acquisitions. Any of these risks and problems could materially harm our
business, prospects, and financial condition. Additionally, we cannot guarantee
that Pro Duct or any other companies we acquire will achieve anticipated
revenues and operating results.

Our success depends on our ability to manage growth effectively.

     The scope of our operations and facilities, the number of our employees
and the geographic area of our operations are growing rapidly, including as a
result of acquisitions. If we are not able to manage our growth effectively,
our business and financial condition will materially suffer. Our growth may
significantly strain our managerial, operational and financial resources and
systems. To manage our growth effectively, we will have to continue to
implement and improve additional management and financial systems and controls,
and to expand, train and manage our employee base. These difficulties will be
increased if we are able to complete our acquisition of Digene.

We have intense competition from other companies.

     We face direct competition from a number of publicly-traded and
privately-held companies, including at least one other manufacturer of a
thin-layer slide preparation system. The development, FDA approval and
commercial marketing of competitive systems for cervical cancer screening could
have a material adverse effect on our business and financial condition. Many of
our existing and potential competitors have substantially greater financial,
marketing, sales, distribution and technical resources than we do, as well as
more experience in research and development, clinical trials, regulatory
matters, manufacturing and marketing.

Our quarterly operating results may vary.

     We expect that our operating results will fluctuate significantly in the
future. Our quarterly results will depend on a number of factors, many of which
are outside our control. These factors include:

    . the extent to which our products gain market acceptance;
    . the rate and size of expenditures incurred as we expand our domestic and
      establish our international sales and distribution networks;
    . the timing of approvals of the ThinPrep System and any other new products,
      including the Pro Duct Health ductal lavage device, for reimbursement by
      third-party payors;
    . the timing and size of sales;
    . the likelihood and timing of FDA approval of PMA supplements related to
      the ThinPrep System and any other new products;
    . the timing and size of expenditures incurred in the research and
      development of new products; and
    . the introduction and market acceptance of competing products or
      technologies.

We currently have limited foreign sales capabilities and cannot guarantee
success in foreign markets.

     Although we commenced sales of our ThinPrep System in countries outside
the United States in 1998, only a small percentage of our sales to date have
been outside of the United States. If we fail to increase our revenues from
sales outside of the United States, our business and financial condition may
suffer materially. While we continue to evaluate possibilities for new foreign
marketing and sales channels, including contract sales organizations,
distributors and marketing partners, our current foreign sales channels are
very limited. We cannot

                                      27

<PAGE>

guarantee that we will successfully develop foreign sales channels or
capabilities that will enable us to generate significant revenue from sales
outside of the United States. Even if we are able to establish foreign sales
capabilities, we may not be able to obtain required third-party reimbursements
and regulatory approvals in foreign countries.

We are uncertain if additional applications of our ThinPrep System will be
successful.

     In late 2000 and early 2001, we entered into separate co-promotion
agreements for the co-promotion of RDC's COBAS(R) AMPLICOR(R) CT/NG test
for the detection of chlamydia and gonorrhea and Digene's Hybrid Capture(R)
II HPV DNA Assay for the detection of the human papillomavirus. Each test
utilizes our ThinPrep collection vial. We intend to continue to evaluate
additional uses of our ThinPrep technology in testing for the presence of other
types of cancers and sexually transmitted diseases. We have not yet determined
which of these additional applications we will seek to develop, commercialize
or promote, alone or with other companies. We cannot guarantee that our
agreements with RDC or Digene will be successful, or that we will be able to
successfully promote, commercialize or develop additional uses of our
technology in connection with testing for other cancers or sexually transmitted
diseases.

We are highly dependent on key personnel.

     We are highly dependent on the principal members of our management and
scientific staff. Loss of our key personnel would likely impede achievement of
our research and development, operational, or strategic objectives. To be
successful, we must retain key employees and attract additional qualified
employees.

Our success depends on our ability to protect our intellectual property rights.

     We rely on a combination of patents, trade secrets, copyrights, trademarks
and confidentiality agreements to protect our proprietary technology, rights
and know-how. We also are the exclusive licensee of certain patented technology
for use in the field of cytology related to the fluid pumping system used in
the ThinPrep System. If we fail to protect, defend and maintain our
intellectual property rights, or if we are subject to a third party claim of
infringement, our business and financial condition will materially suffer.

Our reliance on sole source suppliers could harm our business.

     We currently obtain certain key components of the ThinPrep System,
including our propriety filter material, from single sources. We have been
increasing our inventory of these components in an effort to reduce this risk.
If we are unable to obtain sufficient quantities of these components at
reasonable prices and in a timely manner, we will not be able to manufacture
our products on a timely and cost-competitive basis, which would materially and
adversely affect our business and financial condition.

     Impact of Euro Conversion. On January 1, 1999, 11 of the 15 member
countries of the European Economic and Monetary Union established fixed
conversion rates between their existing sovereign currencies and the Euro, and
adopted the Euro as their common legal currency. The Euro is currently being
traded on currency exchanges and is available for non-cash transactions. For a
three-year transition period, both the Euro and each participating country's
sovereign currency will remain legal currency. After June 30, 2002, the Euro
will be the sole legal tender for the participating countries.

     A significant amount of uncertainty exists as to the interpretation of
certain Euro regulations and the effect that the Euro will have on the
marketplace, including its impact on currency exchange rate risk, pricing,
competition, contracts, information systems and taxation. During 2001, the
Company derived less than 1% of its revenues from sales of the ThinPrep System
to customers in countries which have converted to the Euro. The Company is
currently evaluating Euro-related issues and the impact that the introduction
of the Euro may have on the Company's business and results of operations. The
Company expects to take appropriate actions based on the results of its
evaluation. The Company has not yet determined the costs of addressing
Euro-related issues, but does not expect such costs to be material. Because the
Company's evaluation of Euro-related issues is at an early stage and is
ongoing, however,

                                      28

<PAGE>

there can be no assurance that such issues and their related costs will not
have a material adverse effect on the Company's business, financial condition
and results of operations.

Item 8. Financial Statements and Supplementary Data

     The information required by this item may be found on pages F-1 through
F-23 of this Form 10-K.

Item 9. Disagreements with Accountants on Accounting and Financial Disclosure

     There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters in the last two fiscal years.

                                   PART III

Item 10. Directors and Executive Officers of the Registrant

     The information required under this item may be found under the sections
captioned "Election of Directors", "Occupations of Directors and Executive
Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's Proxy Statement (the "2002 Proxy Statement"), which will be filed
with the Securities and Exchange Commission not later than 120 days after the
close of the Company's fiscal year ended December 31, 2001, and is incorporated
herein by reference.

Item 11. Executive Compensation

     The information required under this item may be found under the section
captioned "Compensation and Other Information concerning Directors and
Officers" in the 2002 Proxy Statement, and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The information required under this item may be found under the section
captioned "Securities Ownership of Certain Beneficial Owners and Management" in
the 2002 Proxy Statement, and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

     The information required under this item may be found under the caption
"Certain Relationships and Related Transactions" in the 2002 Proxy Statement,
and is incorporated herein by reference.

                                      29

<PAGE>

                                   PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

    (a)(1) Consolidated Financial Statements.

        For a list of the consolidated financial information included herein,
    see Index on page F-1.

    (a)(2) Financial Statement Schedules.

        Schedules not listed above have been omitted because the information
    required to be set forth therein is not applicable or is shown in the
    accompanying Consolidated Financial Statements or notes thereto.

    (a)(3) List of Exhibits.

        The following exhibits are filed as part of and incorporated by
    reference into, this Annual Report on Form 10-K:

Exhibit Number                           Description
--------------   --------------------------------------------------------
2.1(11)          Agreement and Plan of Merger, dated October 17, 2001, by
                 and among Cytyc Corporation, Pro Duct Health, Inc., and
                 Cytyc Health Corporation.
2.2(12)          Amendment to Agreement and Plan of Merger, dated as of
                 November 30, 2001, by and among Cytyc Corporation, Pro
                 Duct Health Inc., and Cytyc Health Corporation.
2.3(13)          Agreement and Plan of Merger, dated as of February
                 19, 2002, by and among Cytyc Corporation, Digene
                 Corporation, and Cruiser, Inc.
3.1(2)           Third Amended and Restated Certificate of Incorporation
                 of the Company.
3.2(2)           Amended and Restated By-Laws of the Company.
3.3(9)           Certificate of Amendment of Third Amended and Restated
                 Certificate of Incorporation.
4.1(1)           Specimen certificate representing the Common Stock.
4.2(3)           Rights Agreement, dated as of August 27, 1997, between
                 Cytyc Corporation and BankBoston, N.A
                 (the "Rights Agreement") which includes as Exhibit A the
                 Form of Certificate of Designations, as Exhibit B the
                 Form of Rights Certificate, and as Exhibit C the Summary
                 of Rights to Purchase Preferred Stock.
4.3(4)           Amendment No. 1 to Rights Agreement, dated as of June
                 22, 1998, between Cytyc Corporation and BankBoston,
                 N.A., amending the Rights Agreement.
10.1(1)*         1988 Stock Plan.
10.2(1)*         1989 Stock Plan.
10.3(1)*         1995 Stock Plan.
10.4(10)*        Amended and Restated 1995 Non-Employee Director Stock
                 Option Plan.
10.5(14)*        1995 Employee Stock Purchase Plan, as amended.
10.6(1)#         License Agreement between the Company and DEKA Products
                 Limited Partnership dated March 22, 1993.
10.7(1)          Form of Indemnification Agreement.
10.8(1)          Lease Agreement between the Company and BFA Realty
                 Partnership, L.P. d/b/a BFA, Limited Partnership of
                 February 1996.
10.9(5)          Amendment No. 1 to Lease Agreement dated as of February
                 1996 between the Company and BFA Realty Partnership,
                 L.P. d/b/a BFA, Limited Partnership.
10.10(6)#        Co-Promotion Agreement dated as of May 27, 1997 by
                 and between Mead Johnson & Company and the Company.
10.11(7)#        Amendment No. 1 to Co-Promotion Agreement dated as of
                 May 27, 1997 by and between Mead Johnson & Company and
                 the Company.
10.12(8)*        Cytyc Corporation Director Deferred Compensation Plan.
10.13(15)*       2001 Non-Employee Director Stock Plan.
10.14(16)*       Pro Duct Health, Inc. 1998 Stock Plan.
21.1**           List of Subsidiaries of the Company.
23.1**           Consent of Arthur Andersen LLP.
24.1**           Power of Attorney (see signature page hereto).

                                      30

<PAGE>

99.1(12)         Escrow Agreement, dated as of November 30, 2001, by and among
                 Cytyc Corporation, the Pro Duct Health, Inc. stockholder
                 representative, and JPMorgan Chase Bank.
99.2(11)         Form of Registration Rights Agreement by and among Cytyc
                 Corporation and holders of the capital stock of Pro Duct
                 Health, Inc.
99.3(11)         Voting Agreement, dated as of October 17, 2001, by and among
                 Cytyc Corporation and certain principal stockholders of Pro
                 Duct Health, Inc.
99.4(13)         Stockholders Agreement dated as of February 19, 2002 by and
                 among Cytyc Corporation, Cruiser, Inc. and executive
                 officers, directors, and certain principal stockholders of
                 Digene Corporation.
99.5(13)         Transaction Option Agreement, dated as of February 19, 2002 by
                 and between Cytyc Corporation and Digene Corporation.

(1)  Incorporated herein by reference to the exhibits to the Company's
     Registration Statement on Form S-1 (File No. 333-00300).
(2)  Incorporated by reference to the exhibits to the Company's Registration
     Statement on Form S-1 (File No. 333-19367).
(3)  Incorporated herein by reference to Exhibit 4.1 to the Company's Current
     Report on Form 8-K, filed August 29, 1997 (File No. 000-27558).
(4)  Incorporated herein by reference to Exhibit 4.2 to the Company's Quarterly
     Report on Form 10-Q, filed August 13, 1998 (File No. 000-27558).
(5)  Incorporated herein by reference to Exhibit 10.9 to the Company's Annual
     Report on Form 10-K, filed March 31, 1998 (File No. 000-27558).
(6)  Incorporated herein by reference to Exhibit 10.1 to the Company's
     Quarterly Report on Form 10-Q, filed August 8, 1997 (File No. 000-27558).
(7)  Incorporated herein by reference to Exhibit 10.11 to the Company's Annual
     Report on Form 10-K, filed March 31, 1998 (File No. 000-27558).
(8)  Incorporated herein by reference to Exhibit 10.12 to the Company's Annual
     Report on Form 10-K, filed March 31, 1999 (File No. 000-27558).
(9)  Incorporated herein by reference to Exhibits 3, 4 to the Company's
     Quarterly Report on Form 10-Q, filed August 14, 2000 (File No. 000-27558).
(10) Incorporated herein by reference to Exhibit 10 to the Company's Quarterly
     Report on Form 10-Q, filed August 14, 2000 (File No. 000-27558).
(11) Incorporated herein by reference to the Exhibits to the Company's Current
     Report on Form 8-K, filed October 19, 2001 (File No. 000-27558).
(12) Incorporated herein by reference to the Exhibits to the Company's Current
     Report on Form 8-K, filed December 14, 2001 (File No. 000-27558).
(13) Incorporated herein by reference to the Exhibits to the Company's Current
     Report on Form 8-K, filed February 20, 2002 (File No. 000-27558).
(14) Incorporated herein by reference to Exhibit 10.5 to the Company's
     Registration Statement on Form S-1 (File No. 333-00300) and Exhibit 10.1 to
     the Company's Quarterly Report on Form 10-Q, filed August 8, 2001 (File No.
     000-27558).
(15) Incorporated herein by reference to Exhibit 10.2 to the Company's
     Quarterly Report on Form 10-Q, filed August 8, 2001 (File No. 000-27558).
(16) Incorporated herein by reference to Exhibit 4 to the Company's
     Registration Statement on Form S-8, filed December 17, 2001 (File No.
     333-75292).

*    Indicates a management contract or any compensatory plan, contract or
     arrangement
**   Filed herewith.
#    Confidential treatment granted as to certain portions.

     (b) Reports On Form 8-K

         There were two reports on Form 8-K filed by the Company for the quarter
         ended December 31, 2001.

                                      31

<PAGE>

     On October 19, 2001, the Company filed a current report on Form 8-K
reporting Item 5 - Other Events - to disclose the Company's execution of a
definitive Agreement and Plan of Merger to acquire Pro Duct Health, Inc., and
filing as exhibits to such Form 8-K under Item 7 - Financial Statements, Pro
Forma Financial Statements and Exhibits -the related Agreement and Plan of
Merger, Voting Agreement and Form of Registration Rights Agreement and a Press
Release announcing the execution of the merger agreement.

     On December 14, 2001, the Company filed a current report on Form 8-K
reporting Item 2 - Acquisition or Disposition of Assets - to disclose the
consummation of the Company's acquisition of Pro Duct Health, Inc., and filing
as exhibits to such Form 8-K under Item 7 - Financial Statements, Pro Forma
Financial Statements and Exhibits - an amendment to the Pro Duct Health
Agreement and Plan of Merger, an Escrow Agreement related to the Pro Duct
acquisition and a Press Release announcing the consummation of the acquisition.

Subsequent 8-K filings

     On February 5, 2002, the Company filed a current report on Form 8-K
reporting Item 5 - Other Events - to disclose Press Release announcing the
Company's establishment of an open market stock repurchase program.

     On February 12, 2002, the Company filed a current report on Form 8-K/A
reporting Amendment No. 1 to its Current Report on Form 8-K dated December 14,
2001, solely to file the financial statements of Pro Duct Health, Inc. required
by Item 7(a) of Form 8-K and the pro forma financial information required by
Item 7(b) of Form 8-K.

     On February 20, 2002, the Company filed a current report on Form 8-K
reporting Item 5 - Other Events - to disclose the Company's execution of a
definitive Agreement and Plan of Merger to acquire Digene Corporation, and
filing as to such Form 8-K under Item 7 - Financial Statements, Pro Forma
Financial Statements and Exhibits - the related Agreement and Plan of Merger,
Stockholders Agreement and Transaction Option Agreement, and a Joint Press
Release announcing the execution of the merger agreement.

(c) Exhibits

     The Company hereby files as part of this Annual Report on Form 10-K the
exhibits listed in Item 14(a)(3) set forth above. Exhibits which are
incorporated herein by reference may be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, Washington, D.C.
20549, and at the SEC's regional offices located at Seven World Trade Center,
Suite 1300, New York, New York 10048, and at Citicorp Center, 500 West Madison
Street, Suite 1400 Chicago, Illinois 60611-2511. Copies of such material may be
obtained by mail from the Public Reference Section of the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
SEC also maintains a Website that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC at the address "http://www.sec.gov".

                                      32

<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                          CYTYC CORPORATION

Date: March 1, 2002

                                          By:     /S/ Patrick J. Sullivan
                                                  -----------------------------
                                                  Chief Executive Officer
                                                  Vice Chairman and Chairman
                                                  elect of the Board of
                                                  Directors

                       POWER OF ATTORNEY AND SIGNATURES

     We, the undersigned officers and directors of Cytyc Corporation, hereby
severally constitute and appoint Patrick J. Sullivan and Robert L. Bowen, and
each of them singly, our true and lawful attorneys, with full power to both of
them and each of them singly, to sign for us and in our names in the capacities
indicated below, any amendments to this Report on Form 10-K generally to do all
things in our names and on our behalf in such capacities to enable Cytyc
Corporation to comply with the provisions of the Securities Exchange Act of
1934, as amended, and all the requirements of the Securities and Exchange
Commission.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant, in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
        Signature                                  Title(s)                                     Date
        ---------                                  --------                                     ----
<S>                                      <C>                                               <C>
  /S/ Patrick J. Sullivan                Chief Executive Officer (Principal                March 1, 2002
  -----------------------                Executive Officer), Vice Chairman
    Patrick J. Sullivan                  and Chairman elect of the Board of
                                         Directors

   /S/ Robert L. Bowen                   Vice President, and                               March 1, 2002
   -------------------                   Chief Financial Officer
     Robert L. Bowen                     (Principal Financial
                                         Officer and Principal
                                         Accounting Officer)

   /S/ Walter E. Boomer                  Director                                          March 1, 2002
   --------------------
     Walter E. Boomer

   /S/ Marc C. Breslawsky                Director                                          March 1, 2002
  ----------------------
    Marc C. Breslawsky

    /S/ Sally W. Crawford                Director                                          March 1, 2002
    ---------------------
    Sally W. Crawford

  /S/ William G. Little                  Director                                          March 1, 2002
  --------------------
    William G. Little

  /S/ William H. Longfield               Director                                          March 1, 2002
  -----------------------
    William H. Longfield

/S/ Joseph B. Martin, M.D., P.H.D.       Director                                          March 1, 2002
----------------------------------
  Joseph B. Martin, M.D., PHD

  /S/ C. William McDaniel                Vice Chairman of the Board of                     March 1, 2002
  ------------------------               Directors
    C. William McDaniel

  /S/ Anna S. Richo                      Director                                          March 1, 2002
    -----------------
      Anna S. Richo

 /S/ Monroe E. Trout , M.D.              Chairman of the Board of                          March 1, 2002
  --------------------------             Directors
    Monroe E. Trout, M.D.
</TABLE>

                                      33

<PAGE>


                              CYTYC CORPORATION

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page
                                                                           ----
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of December 31, 2000 and 2001.............. F-3
Consolidated Statements of Operations for the Years
  Ended December 31, 1999, 2000 and 2001.................................. F-4
Consolidated Statements of Stockholders' Equity for
  the Years Ended December 31, 1999, 2000 and 2001........................ F-5
Consolidated Statements of Cash Flows for the Years
  Ended December 31, 1999, 2000 and 2001.................................. F-6
Notes to Consolidated Financial Statements................................ F-7

                                      F-1

<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Cytyc Corporation:

     We have audited the accompanying consolidated balance sheets of Cytyc
Corporation (a Delaware corporation) and subsidiaries as of December 31, 2000
and 2001, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cytyc
Corporation and subsidiaries as of December 31, 2000 and 2001 and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.

                                          /s/ Arthur Andersen LLP

Boston, Massachusetts
January 21, 2002,
(except with respect to
the matter discussed in
note 14 as to which the
date is February 19, 2002).

                                      F-2

<PAGE>

                                CYTYC CORPORATION

                           CONSOLIDATED BALANCE SHEETS
               (in thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                              ------------
                                                                                             2000      2001
                                                                                            ------    ------
                                     ASSETS
<S>                                                                                        <C>        <C>
Current assets:
    Cash and cash equivalents ........................................................     $  61,605  $  71,928
    Short-term investments ...........................................................        27,240     81,314
    Accounts receivable, net of allowance of $1,510 and $1,987 at December 31, 2000
       and 2001, respectively ........................................................        40,214     50,278
    Inventories ......................................................................        11,093     10,698
    Prepaid expenses and other current assets ........................................           937      1,583
                                                                                           ---------  ---------
       Total current assets ..........................................................       141,089    215,801
                                                                                           ---------  ---------
Property and equipment, net ..........................................................        21,363     26,662
                                                                                           ---------  ---------
Intangible assets:
    Patented technology, net of accumulated amortization of $219 at December 31, 2001              -        211
    Acquired developed technology and know-how, net of accumulated amortization of
       $122 at December 31, 2001 .....................................................             -     18,878
    Goodwill, net of accumulated amortization of $444 and $885 at December 31,
       2000 and 2001, respectively ...................................................         2,670     94,881
                                                                                           ---------  ---------
       Total intangible assets .......................................................         2,670    113,970
                                                                                           ---------  ---------
Deferred tax assets, net .............................................................             -     23,485
Other assets, net ....................................................................         5,764      6,842
                                                                                           ---------  ---------
       Total assets ..................................................................     $ 170,886  $ 386,760
                                                                                           =========  =========
                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable .................................................................     $   6,043  $   9,325
    Accrued expenses .................................................................        15,720     24,789
    Deferred revenue .................................................................         2,077      1,501
                                                                                           ---------  ---------
       Total current liabilities .....................................................        23,840     35,615
                                                                                           ---------  ---------

Non-current liabilities ..............................................................             -        837
                                                                                           ---------  ---------

Commitments and contingencies (Note 11)

Stockholders' equity:
    Preferred Stock, $0.01 par value--
      Authorized--5,000,000 shares
      No shares issued or outstanding ................................................             -          -
    Common Stock, $0.01 par value--
      Authorized--200,000,000 shares
      Issued and outstanding--113,039,385 shares in 2000 and 121,355,344 in 2001 .....         1,130      1,214
    Additional paid-in capital .......................................................       183,653    376,092
    Deferred compensation ............................................................             -       (999)
    Accumulated other comprehensive loss .............................................          (632)    (1,529)
    Accumulated deficit ..............................................................       (37,105)   (24,470)
                                                                                           ---------  ---------
       Total stockholders' equity ....................................................       147,046    350,308
                                                                                           ---------  ---------

       Total liabilities and stockholders' equity ....................................     $ 170,886  $ 386,760
                                                                                           =========  =========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       F-3

<PAGE>

                                CYTYC CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                      Years Ended December 31,
                                                                   ----------------------------
                                                                     1999     2000       2001
                                                                   -------  ---------  --------
<S>                                                               <C>       <C>        <C>
Net sales ...................................................     $ 81,100  $ 142,065  $220,993
Cost of sales ...............................................       15,815     24,565    40,168
                                                                   -------  ---------  --------
    Gross profit ............................................       65,285    117,500   180,825
                                                                   -------  ---------  --------
Operating expenses:
    Research and development ................................       13,372     14,171    18,975
    In-process research and development .....................            -          -    56,000
    Sales and marketing .....................................       44,017     55,162    59,161
    General and administrative ..............................        6,765     13,872    16,987
                                                                   -------  ---------  --------
       Total operating expenses .............................       64,154     83,205   151,123
                                                                   -------  ---------  --------
Income from operations ......................................        1,131     34,295    29,702
                                                                   -------  ---------  --------
Other income (expense):
    Interest income .........................................        3,790      4,734     5,412
    Other income (expense) ..................................          849        (13)     (493)
    Litigation settlement ...................................            -          -     3,087
                                                                   -------  ---------  --------
        Total other income, net .............................        4,639      4,721     8,006
                                                                   -------  ---------  --------
Income before provision for income taxes ....................        5,770     39,016    37,708
Provision for income taxes ..................................          130        853    25,073
                                                                   -------  ---------  --------
Net income ..................................................     $  5,640  $  38,163  $ 12,635
                                                                   =======  =========  ========
Net income per common and potential common share:
    Basic ...................................................     $   0.05  $    0.34  $   0.11
                                                                   =======  =========  ========
    Diluted .................................................     $   0.05  $    0.32  $   0.10
                                                                   =======  =========  ========

Weighted average common and potential common shares outstanding:
    Basic ...................................................      107,346    110,754   115,396
    Diluted .................................................      112,530    117,960   120,776
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       F-4

<PAGE>

                                CYTYC CORPORATION

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                      (in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                              Accumulated
                                                                                                 Other                     Total
                                                         Common Stock      Additional Deferred   Compre-                   Stock-
                                         Comprehen-        Number of        Paid-in   Compen-    hensive     Accumula-    holders'
                                        sive Income    Shares     Value     Capital   sation   Income(Loss) ted Deficit    Equity
                                          --------     ------    ------    --------  --------  ------------   --------    --------
<S>                                      <C>         <C>          <C>        <C>       <C>       <C>         <C>         <C>
Balance, December 31, 1998               $       -   106,791,570  $ 1,068    $165,541  $     -     $    106    $(80,908)   $ 85,807
Exercise of common stock
  options and warrants                                 1,501,026       15       3,291        -            -           -       3,306
Issuance of shares under Employee Stock
  Purchase Plan                                  -        97,920        -         276        -            -           -         276
Issuance of shares under Directors'
  Stock Plan                                     -        29,118        -         121        -            -           -         121
Comprehensive income--
  Net income                             $   5,640             -        -           -        -            -       5,640       5,640
  Other comprehensive income (loss)-
   Unrealized loss on
    marketable securities                     (150)            -        -           -        -         (150)          -        (150)
   Cumulative translation adjustment            (9)            -        -           -        -           (9)          -          (9)
                                         ---------
   Comprehensive income                  $   5,481             -        -           -        -            -           -           -
                                         =========   -----------  -------    --------  -------     --------    --------    --------
Balance, December 31, 1999                           108,419,634    1,083     169,229        -          (53)    (75,268)     94,991
Exercise of common stock options                 -     4,541,340       47       8,320        -            -           -       8,367
Issuance of shares under Employee Stock
  Purchase Plan                                  -        50,025        -         694        -            -           -         694
Issuance of shares under Directors' and
  Executive Stock Plans                          -        28,386        -         241        -            -           -         241
Issuance of common stock warrant                 -             -        -       5,169        -            -           -       5,169
Comprehensive income -
  Net income                             $  38,163             -        -           -        -            -      38,163      38,163
  Other comprehensive income (loss)-
   Unrealized gain on marketable
    securities                                 165             -        -           -        -          165           -         165
   Cumulative translation adjustment          (744)            -        -           -        -         (744)          -        (744)
                                         ---------
   Comprehensive income                  $  37,584             -        -           -        -            -           -           -
                                         =========   -----------  -------    --------  -------     --------    --------    --------
Balance, December 31, 2000                           113,039,385    1,130     183,653        -         (632)    (37,105)    147,046

Exercise of common stock options                 -     2,733,117       27       8,714        -            -           -       8,741
Issuance of common stock to non-
  employees for services                         -         3,000        -          52        -            -           -          52
Issuance of shares under Employee Stock
  Purchase Plan                                  -        61,280        1       1,065        -            -           -       1,066
Issuance of shares under Directors' and
  Executive Stock Plans                          -        24,162        1         392        -            -           -         393
Exercise of common stock warrant                 -       494,400        5          (5)       -            -           -           -
Issuance of common stock for Pro Duct
  acquisition                                    -     5,000,000       50     140,114        -            -           -     140,164
Deferred compensation for common stock
  options assumed in Pro Duct acquisition        -             -        -       1,054   (1,054)           -           -           -
Amortization of deferred compensation            -             -        -           -       55            -           -          55
Tax benefit from stock options exercised         -             -        -      41,053        -            -           -      41,053
Comprehensive income -
  Net income                             $  12,635             -        -           -        -            -      12,635      12,635
  Other comprehensive income (loss)-
   Unrealized gain on marketable
     securities                                 98             -        -           -        -           98           -          98
   Cumulative translation adjustment          (995)            -        -           -        -         (995)          -        (995)
                                         ---------
   Comprehensive income                  $  11,738             -        -           -        -            -           -           -
                                         =========   -----------  -------    --------  -------     --------    --------    --------
Balance, December 31, 2001                           121,355,344  $ 1,214    $376,092  $  (999)    $ (1,529)   $(24,470)   $350,308
                                                     ===========  =======    ========  =======     ========    ========    ========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       F-5

<PAGE>

                                CYTYC CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                       Years Ended December 31,
                                                                                                  ---------------------------------
                                                                                                    1999        2000         2001
                                                                                                  --------    --------    ---------
<S>                                                                                               <C>         <C>         <C>
Cash flows from operating activities:
   Net income ................................................................................    $  5,640    $ 38,163    $  12,635
   Adjustments to reconcile net income to net cash provided by operating activities ..........
       Depreciation and amortization .........................................................       1,951       3,460        4,852
       Provision for doubtful accounts .......................................................         299         656          567
       Amortization of warrant ...............................................................           -       1,465        2,499
       Acquired in-process research and development ..........................................           -           -       56,000
       Non-cash gain from settlement of litigation ...........................................           -           -       (2,712)
       Compensation expense related to issuance of stock to directors, executives and non-
         employee awards .....................................................................         121         241          445
       Compensation expense related to options assumed in acquisition ........................           -           -           55
       Change in deferred tax asset ..........................................................           -           -      (20,540)
       Changes in assets and liabilities, excluding effects of acquisition-
             Accounts receivable .............................................................     (10,130)    (18,050)     (10,549)
             Inventories .....................................................................      (1,454)     (5,388)         598
             Prepaid expenses and other current assets .......................................        (133)       (139)        (639)
             Accounts payable ................................................................       1,845       1,188        2,829
             Accrued expenses ................................................................       3,253       3,966        5,156
             Deferred revenue ................................................................         309         355         (576)
             Tax benefit from exercise of options ............................................           -           -       41,053
                                                                                                  --------    --------    ---------
                  Net cash provided by operating activities ..................................       1,701      25,917       91,673
                                                                                                  --------    --------    ---------
Cash flows from investing activities:
       Acquisition of Acu-Pak, Inc., net of cash acquired ....................................           -      (5,760)           -
       Acquisition of Pro Duct Health Inc., net of cash acquired .............................           -           -      (25,791)
       (Increase) decrease in other assets ...................................................        (878)        651       (1,147)
       Purchases of property and equipment ...................................................      (3,786)    (10,813)      (9,248)
       Purchases of short-term investments ...................................................     (59,882)    (49,803)    (156,293)
       Proceeds from sale of short-term investments ..........................................      55,392      63,259      102,317
                                                                                                  --------    --------    ---------
                 Net cash used in investing activities .......................................      (9,154)     (2,466)     (90,162)
                                                                                                  --------    --------    ---------
Cash flows from financing activities:
       Proceeds from exercise of stock options and warrants ..................................       3,306       8,367        8,741
       Proceeds from issuance of shares under Employee Stock Purchase Plan ...................         276         694        1,066
                                                                                                  --------    --------    ---------
                 Net cash provided by financing activities ...................................       3,582       9,061        9,807
                                                                                                  --------    --------    ---------
Effect of exchange rate changes on cash ......................................................          (9)       (593)        (995)
                                                                                                  --------    --------    ---------
Net (decrease) increase in cash and cash equivalents .........................................      (3,880)     31,919       10,323
Cash and cash equivalents, beginning of year .................................................      33,566      29,686       61,605
                                                                                                  --------    --------    ---------
Cash and cash equivalents, end of year .......................................................    $ 29,686    $ 61,605    $  71,928
                                                                                                  ========    ========    =========
Supplemental disclosure of cash flow information:
       Cash paid for income taxes ............................................................    $    138    $    442    $   1,866
                                                                                                  ========    ========    =========
Supplemental disclosure of non-cash items:
       Unrealized  holding (loss) gain on short-term investments .............................    $   (150)   $    165    $      98
                                                                                                  ========    ========    =========
       Issuance and exercise of common stock warrant to Quest Diagnostics, Inc ...............    $      -    $  5,169    $       5
                                                                                                  ========    ========    =========
       Non-cash portion of gain on settlement of litigation ..................................    $      -    $      -    $       -
                                                                                                  ========    ========    =========
       Issuance of shares under director's and executive stock plans .........................    $    121    $    241    $     393
                                                                                                  ========    ========    =========
       Issuance of common stock to non-employees for services ................................    $      -    $      -    $      52
                                                                                                  ========    ========    =========
       In connection with the acquisition of Acu-Pak, Inc and Pro Duct Health Inc., in 2000
          and 2001, respectively, the following non-cash transactions occurred:
          Fair value of assets acquired ......................................................    $      -    $  7,173    $ 115,158
          In-process research and development ................................................           -           -       56,000
          Fair value of common shares issued and stock options assumed .......................           -           -     (140,164)
          Cash paid for acquisition and acquisition costs.....................................           -      (6,179)     (25,791)
                                                                                                  --------    --------    ---------
             Liabilities assumed............................ .................................    $      -    $    994    $   5,203
                                                                                                  ========    ========    =========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       F-6

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

(1) The Company

    Cytyc Corporation and subsidiaries (the "Company") design, develop,
manufacture and market sample preparation systems for medical diagnostic
applications. The Company's principal product, the ThinPrep System, is an
automated system for the preparation of non-gynecological samples and cervical
specimens on microscope slides.

    In 1991, the Company commenced commercial sales of ThinPrep Processors,
reagents, filters and related supplies for non-gynecological diagnostic
applications to clinical laboratories and hospitals. On May 20, 1996, the
Company received clearance from the U.S. Food and Drug Administration to market
the ThinPrep System for cervical cancer screening.

     In November 2001, the Company acquired Pro Duct, a privately held company
that developed a ductal lavage device to enhance the evaluation of risk for
breast cancer. The Company intends to market the ductal lavage device as the
ThinPrep Breast Test (TM), subject to required regulatory approvals.

    In the past, the Company incurred substantial losses, principally from
expenses associated with obtaining FDA approval of the ThinPrep System,
engineering and development efforts related to the ThinPrep System, expansion
of the Company's manufacturing facilities and the establishment of a sales and
administrative organization. The Company continues to be subject to certain
risks common to medical device companies in similar stages of development,
including dependence on a single product, extensive government regulation,
uncertainty of market acceptance, and uncertainty of future profitability.

(2) Summary of Significant Accounting Policies

    The accompanying consolidated financial statements reflect the application
of certain significant accounting policies, as discussed below and elsewhere in
the notes to consolidated financial statements. The Company considers its most
critical accounting policies, defined as those which are both important to the
portrayal of the Company's financial condition and results and require
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. The Company has identified its critical accounting policies to be
those related to revenue recognition, valuation of long-lived assets and
deferred taxes and accounts receivable reserve. The preparation of these
consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

  (a) Principles of Consolidation

     The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries: Cytyc Europe, S.A. (a Swiss
corporation) (including its wholly-owned subsidiaries Cytyc Swiss, S.A. and
Cytyc SARL, whose wholly-owned subsidiaries are Cytyc Italia, S.R.L. and Cytyc
France, S.A.R.L), Cytyc (Australia) Pty, Limited (an Australian corporation),
Cytyc Canada, Ltd. (a Canadian corporation), Cytyc (UK) Limited (a United
Kingdom corporation), Cytyc Germany GmbH (a German company), Cytyc Securities
Corporation (a Massachusetts securities corporation), Cytyc Interim Inc., (a
Delaware corporation), Cytyc International, Inc., (a Delaware corporation),
Cytyc Health Corporation (a Delaware corporation) Cruiser, Inc. ( a Delaware
corporation) and Cytyc Healthcare Ventures, LLC (a Delaware limited liability
corporation). All intercompany amounts have been eliminated in consolidation.

  (b) Revenue Recognition

     The Company follows the provisions of Staff Accounting Bulletin No. 101
(SAB 101), Revenue Recognition. Accordingly, the Company recognizes product
revenue upon shipment, provided that there is persuasive evidence of an
arrangement, there are no uncertainties regarding acceptance, the sales price is
fixed or determinable, collection of the resulting receivable is probable and
only perfunctory Company obligations included in the arrangement remain to be
completed. Deferred revenue represents amounts relating to deferred interest
recorded in connection with sales-type finance leases with customers and amounts
related to product billed for which revenue has not been recognized. The
adoption of SAB 101 in 2000 did not have a material impact on the Company's
results of operations.

                                       F-7

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

(c) Cash and Cash Equivalents

     Cash equivalents consist of money market mutual funds, commercial paper
and U.S. Government securities with original maturities, at date of purchase,
of three months or less.

(d) Short-term Investments

     The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and
Equity Securities.  The Company has classified its marketable securities as
available-for-sale and records them at fair value with the unrealized gains and
losses reported as a component of accumulated other comprehensive income in
stockholders' equity (see Note 2 (l)).

     At December 31, 2001, the Company's available-for-sale securities had
contractual maturities that expire at various dates through December 2002. The
fair value of available-for-sale securities was determined based on quoted
market prices at the reporting date for those securities. Available-for-sale
securities are shown in the consolidated financial statements at fair market
value. At December 31, 2001 and 2000, the amortized cost basis, aggregate fair
value, gross unrealized holding gains (losses) and average months to maturity
by major security type are as follows:

<TABLE>
<CAPTION>
                                                 Gross Unrealized
                                      Amortized    Holding Gains       Fair
                                        Cost         (Losses)         Value
                                        ----         --------         -----
                                                  (in thousands)
<S>                                   <C>        <C>                 <C>
December 31, 2001
-----------------
Available-for-sale securities
U.S. Government and Agency
securities (average maturity
 of 3.9 months)...............        $ 55,711       $   44          $ 55,755
Corporate Bonds (average
 maturity of 5.0 months)......          22,601           68            22,669
Commercial Paper (average
 maturity of 1.2 months)......           2,889            1             2,890
                                      --------       ------          --------
                                      $ 81,201       $  113          $ 81,314
                                      ========       ======          ========

December 31, 2000
-----------------
Available-for-sale securities
U.S. Government and Agency
securities (average maturity
 of 8.2 months)...............        $ 14,535       $   21          $ 14,556
Corporate Bonds (average
 maturity of 9.4 months)......           1,691            6             1,697
Commercial Paper (average
 maturity of 2.5 months)......          10,999          (12)           10,987
                                      --------       ------          --------
                                      $ 27,225       $   15          $ 27,240
                                      ========       ======          ========
</TABLE>

(e) Concentration of Credit Risk

     Financial instruments that potentially subject the Company to
concentrations of credit risk are principally cash, cash equivalents,
short-term investments and accounts receivable. The Company places its
investments in highly rated financial institutions. Concentration of
credit risk with respect to accounts receivable is limited to certain
customers to whom the Company makes substantial sales. To reduce risk, the
Company routinely assesses the financial strength of its customers and, as
a consequence, believes that its accounts receivable credit risk exposure is
limited. The Company maintains an allowance for potential credit losses but
historically has not experienced any significant credit losses related to an
individual customer or groups of customers in any particular industry or
geographic area. In 1999, 2000 and 2001 the accounts receivable balance from
one customer represented approximately 13%, 15% and 20% of the Company's
accounts receivable portfolio.

                                       F-8

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

(f) Dependence on Single Source Suppliers

     Certain key components of the ThinPrep System, including its proprietary
filter material, are currently provided to the Company by single sources. In
the event that the Company is unable to obtain sufficient quantities of such
components on commercially reasonable terms, or in a timely manner, the Company
would not be able to manufacture its products on a timely and cost-competitive
basis, which would have a material adverse effect on the Company's business,
consolidated financial position and results of operations.

(g) Depreciation and Amortization

     The Company provides for depreciation and amortization by charges to
operations, on a straight-line basis, in amounts estimated to allocate the cost
of the assets over their estimated useful lives as follows:

<TABLE>
<CAPTION>
                                                           Estimated
                                                           ---------
Asset Classification                                      Useful Life
--------------------                                      -----------
<S>                                                       <C>
 Production equipment................................       3-7 Years
 Research equipment..................................       3-7 Years
 Furniture, fixtures and computer equipment..........       2-7 Years
 Building............................................       40 Years
 Leasehold improvements..............................     Life of lease
</TABLE>

   (h) Other Assets

     Other assets consist primarily of the value of Tripath common shares, (see
Note 11 (c)), long-term lease receivables from the sale of ThinPrep Processors
and the unamortized balance of the value assigned to a warrant (see Note 2 (r)).

   (i) Research and Development Costs

     The Company charges research and development costs to operations as
incurred.

   (j) Net Income Per Common Share

     The Company follows the provisions of SFAS No. 128, Earnings Per Share,
which requires companies to report both basic and diluted per share data, for
all periods for which a statement of operations is presented. Basic net income
per share is computed by dividing net income by the weighted average number of
common shares outstanding.  Diluted net income per share is computed by
dividing net income by the weighted average number of common shares and
potential common shares from outstanding stock options and warrants. Potential
common shares are calculated using the treasury stock method and represent
incremental shares issuable upon exercise of the Company's outstanding stock
options and warrant. The following table provides a reconciliation of the
denominators used in calculating basic and diluted net income per share for the
years ended December 31, 1999, 2000 and 2001.

                                      F-9

<PAGE>

                                  CYTYC CORPORATION

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  December 31, 2001
                                     (Continued)

<TABLE>
<CAPTION>
                                                  Years Ended December 31,
                                                  ------------------------
                                                        (in thousands)
                                                        --------------
                                              1999            2000         2001
                                              ----            ----         ----
<S>                                         <C>            <C>           <C>
Basic weighted average common shares
  outstanding........................       107,346        110,754       115,396
Dilutive effect of assumed exercise
  of stock options and warrant.......         5,184          7,206         5,380
                                            -------        -------       -------
Weighted average common shares
  outstanding assuming dilution......       112,530        117,960       120,776
                                            -------        -------       -------
</TABLE>

     Diluted weighted average shares outstanding excludes 86,183 and 317,006
and 244,079 potential common shares from stock options and warrant outstanding
for the years ended December 31, 1999, 2000 and 2001, respectively, as their
effect would be anti-dilutive.

       In accordance with the provisions of SFAS No. 128, and as a result of the
January 2000 and March 2001 stock splits, the Company has retroactively
restated prior years' earnings per share (see Note 9).

   (k) Post-Retirement and Post-Employment Benefits

     The Company has no obligations for post-retirement or post-employment
benefits.

   (l) Reporting Comprehensive Income

     SFAS No. 130 Reporting Comprehensive Income establishes standards for the
reporting and display of comprehensive income and its components in the
consolidated financial statements. Comprehensive income is the total of net
income and all other non owner changes in equity including such items as
unrealized holding gains (losses) on securities classified as
available-for-sale, foreign currency translation adjustments and minimum
pension liability adjustments. The Company has chosen to disclose comprehensive
income in the accompanying consolidated statements of stockholders' equity.

     The components of accumulated other comprehensive income (loss) are as
follows:
<TABLE>
<CAPTION>

                                                Year ended December 31,
                                     ----------------------------------------------
<S>                                  <C>             <C>            <C>
                                                     Unrealized       Accumulated
                                      Cumulative   Gain (Loss) on        Other
                                     Translation   Available-for-    Comprehensive
                                      Adjustment   sale Securities   Income (Loss)
                                     ------------  ---------------   --------------
                                                    (in thousands)
Balance as of December 31, 1998..... $      106    $            -    $        106
   Current period change............         (9)             (150)           (159)
                                     ------------  ---------------   --------------
Balance as of December 31, 1999.....         97              (150)            (53)
   Current period change............       (744)              165            (579)
                                     ------------  ---------------   --------------
Balance as of December 31, 2000.....       (647)               15            (632)
   Current period change............       (995)               98            (897)
                                     ------------  ---------------   --------------
Balance as of December 31, 2001..... $   (1,642)   $          113    $     (1,529)
                                     ============  ===============   ==============
</TABLE>


   (m) Segment and Enterprise-Wide Reporting

     SFAS No. 131 Disclosures About Segments of an Enterprise and Related
Information requires certain financial and supplementary information to be
disclosed on an annual and interim basis for each reportable operating segment
of an enterprise, as defined. The Company derives substantially all of its
operating revenue from the sale and support of one group of similar products
and services. Accordingly, based on the criteria set forth in SFAS No. 131, the
Company currently operates in one segment, medical diagnostic equipment.

     SFAS No. 131 also requires that certain enterprise-wide disclosures be made
related to products and services, geographic areas and significant customers.
Primarily all of the Company's assets are located within the United States.
During 1999, 2000 and 2001, the Company derived its sales from the following
countries (as a percentage of net sales):

<TABLE>
<CAPTION>
                                   Years Ended
                                   -----------
                        1999          2000          2001
                        ----          ----          ----
 <S>                    <C>           <C>           <C>
 United States           92%           92%           93%
 Other                    8%            8%            7%
                        ----          ----          ----
                        100%          100%          100%
                        ====          ====          ====
</TABLE>

                                      F-10

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

In 1999, 2000 and 2001, sales to one customer represented approximately 11%,
19%, and 20% respectively, of net sales.

(n) Long-lived assets

    In accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the Company
continually evaluates whether events or circumstances have occurred that
indicate that the carrying value of these assets may be impaired. The Company
believes there has been no significant impairment of its long-lived assets as
of each of the balance sheet dates presented.

(o) Translation of Foreign Currencies

    The accounts of the Company's foreign subsidiaries are translated in
accordance with SFAS No. 52, Foreign Currency Translation. Accordingly, assets
and liabilities of the Company's foreign subsidiaries are translated at the
rates of exchange in effect at year-end. Revenues and expenses are translated
using exchange rates in effect during the year. Prior to 1999, the functional
currency of these subsidiaries was determined to be the U.S. dollar. As a
result, foreign currency translation for all years prior to 1999 have been
included in the accompanying consolidated statements of operations. However, in
1999, due to the growth in the cash flows of the subsidiaries and other factors,
the Company determined that the functional currency of its subsidiaries should
be the local currency. As a result, gains and losses from foreign currency
translation are credited or charged to cumulative translation adjustment
included in stockholders' equity in accumulated other comprehensive income
(loss) in the accompanying consolidated balance sheets. The Company realized net
foreign currency transaction losses of approximately $292,000, $16,000, and
$192,000 in 1999, 2000 and 2001, respectively.

(p) Recent Accounting Pronouncements

    In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.
This statement requires companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. SFAS
No. 133, as amended by SFAS No. 137 and SFAS No. 138, was effective for the
Company's year ending December 31, 2001. The adoption of this statement did not
have a significant impact on the Company, its consolidated financial position
or results from operations.

    In July 2001, FASB issued SFAS No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all
business combinations initiated after June 30, 2001 be accounted for using the
purchase method of accounting. SFAS No. 142 discusses how intangible assets that
are acquired should be accounted for in financial statements upon their
acquisition and also how goodwill and other intangible assets should be
accounted for after they have been initially recognized in the financial
statements. Beginning on January 1, 2002, with the adoption of SFAS No. 142,
goodwill and certain purchased intangibles deemed to have indefinite lives will
no longer be subject to amortization over their estimated useful life. Rather,
the goodwill and certain purchased intangibles will be subject to an annual
assessment for impairment based on fair value. The provisions of SFAS No. 142
are required to be applied starting with fiscal years beginning after December
15, 2001. The Company expects this will reduce annual amortization expense by
approximately $450,000. Management is currently evaluating the impact that this
statement will have on the Company's financial statements in reviewing goodwill
for impairment when applying the fair value based test.

                                      F-11

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

     In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supercedes SFAS No. 121.
SFAS No. 144 further refines the requirements of SFAS No. 121 that companies (1)
recognize an impairment loss only if the carrying amount of a long-lived asset
is not recoverable based on its undiscounted future cash flows and (2) measure
an impairment loss as the difference between the carrying amount and fair value
of the asset.  In addition, SFAS No. 144 provides guidance on accounting and
disclosure issues surrounding long-lived assets to be disposed of by sale.  The
Company does not expect adoption of this statement to have a material impact on
its financial position or results of operations.

(q) Fair Value of Financial Instruments

     The estimated fair market values of the Company's financial instruments,
which include marketable securities, accounts receivable and accounts payable
approximate their carrying values due to the short-term nature of these
instruments.  The Company's financial instruments also include investment in
sales type leases.  These leases have fixed rates of interest and will be
subject to fluctuations in fair value during their terms.  As of December 31,
2001, the fair value of these leases approximate their carrying value based on
underlying market conditions.

(r) Agreement with Quest Diagnostics, Inc.

     In January 2000, the Company entered into a supply and co-marketing
agreement with Quest to market the ThinPrep Pap Test as Quest's exclusive
liquid-based cervical cancer screening methodology.  As partial consideration
for the exclusive nature of the relationship, Cytyc issued Quest a warrant to
purchase 900,000 shares of common stock at an exercise price of $10.14 per
share.  The Company calculated the fair value of the warrant to be
approximately $5.2 million and is amortizing such amount as a reduction in
revenue over the three-year term of the agreement. The unamortized balance of
approximately $1,205,000 related to this warrant is recorded as a component of
other assets in the accompanying balance sheet. The warrant was exercised in
full on June 6, 2001 on a net issuance basis and the Company issued Quest
494,400 shares of the Company's common stock.

(3) Acquisitions

(a) Acquisition of Acu-Pak, Inc.

     On January 3, 2000, the Company acquired Acu-Pak, a contract packager in
Londonderry, New Hampshire, that was manufacturing, filling vials containing
and distributing all of the Company's solutions for its ThinPrep line of
products.  In connection with the acquisition, the Company paid approximately
$6.0 million in cash, of which approximately $2.5 million was allocated to land
and building, approximately $0.4 million to equipment, and approximately $3.1
million to goodwill.  The Company accounted for the acquisition as a purchase.
Pro forma information has not been presented herein because of immateriality.

(b) Acquisition of Pro-Duct Health, Inc.

     On November 30, 2001, the Company completed its acquisition of Pro Duct,
by means of a merger ("the Merger") of Pro Duct with and into Cytyc Health
Corporation, pursuant to an Agreement and Plan of Merger dated as of October
17, 2001, as amended, (the "Merger Agreement"). Pro Duct is focused on the
development and commercialization of an approach to enhance the evaluation of
risk for breast cancer.

     Upon the effective time of the Merger on November 30, 2001, the Company
issued an aggregate of approximately 5.0 million shares of the Company's common
stock, par value $0.01 per share, and $38,500,000 in

                                      F-12

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

cash in exchange for all of the outstanding capital stock, vested options and
warrants of Pro Duct.

     Certain shares of the Company's common stock payable to the former Pro
Duct securityholders totaling approximately 489,075 shares and cash of
approximately $3,850,000 have been deposited with an escrow agent pursuant to
the Merger Agreement and an Escrow Agreement dated as of November 30, 2001. The
escrowed shares and cash will be used to indemnify the Company against losses,
if any, resulting from breaches of the representations, warranties and
covenants made by Pro Duct in the Merger Agreement or for certain intellectual
property matters. The escrowed shares and cash that are not needed to cover
outstanding claims made by the Company will be released on December 6, 2002.

     The aggregate purchase price for Pro Duct was approximately $183,898,000
of which $38,500,000 was paid in cash, approximately $137,650,000 was related
to the value of approximately 5.0 million shares of the Company's common stock,
approximately $5,234,000 was for acquisition related fees and expenses and
approximately $2,514,000 was related to the fair value of approximately 105,000
unvested Pro Duct stock options. The Pro Duct Merger has been accounted for as
a purchase in accordance with SFAS No. 141, and accordingly, the results of
operations of Pro Duct have been included in the accompanying consolidated
statement of operations from the date of the acquisition.  In accordance with
SFAS 141, the purchase price has been allocated to the assets and liabilities
of Pro Duct based on their fair value.

     As part of the purchase price allocation, all intangible assets that are a
part of the merger were identified and valued. It was determined that
technology assets had value. As a result of this identification and valuation
process, the Company allocated approximately $56.0 million of the purchase
price to in-process research and development projects. This allocation
represented the estimated fair value based on risk-adjusted cash flows related
to the incomplete research and development related primarily to three projects.
At the date of acquisition, the development of these projects had not yet
reached technological feasibility and the research and development in progress
had no alternative future uses. Accordingly, the acquired in-process research
and development was charged to expense as of the date of the merger.

     In making the purchase price allocation, management considered present
value calculations of income, an analysis of project accomplishments and
remaining outstanding items, an assessment of overall contributions, as well as
project risks. The value assigned to purchased in-process research and
development was determined by estimating the costs to develop the acquired
technology into commercially viable products, estimating the resulting net cash
flows from the projects, and discounting the net cash flows to their present
value. The revenue projection used to value the in-process research and
development was based on estimates of relevant market sizes and growth factors,
expected trends in technology, and the nature and expected timing of new
product introductions by the Company and its competitors. The resulting net
cash flows from such projects are based on management's estimates of cost of
sales, operating expenses, and income taxes from such projects.

     Aggregate revenues for Pro Duct were estimated to grow at a compounded
annual growth rate of approximately 111% for the five years following the
acquisition, assuming the successful completion and market acceptance of the
major research and development programs.

     The rates utilized to discount the net cash flows to their present value
were based on estimated weighted average cost of capital calculations. Due to
the nature of the forecast and the risks associated with the development
projects, a range of discount rates of 25% to 30% were used for the in-process
research and development. The discount rate utilized was higher than the
Company's weighted average cost of capital due to the inherent uncertainties
surrounding the successful development of the purchased in-process technology,
the useful life of such technology, the

                                      F-13

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

profitability levels of such technology, and the uncertainty of technological
advances that are unknown at this time.

     If these projects are not successfully developed, the sales and
profitability of the combined company may be adversely affected in the future
periods. Additionally, the value of other acquired intangible assets may become
impaired.

     As a result of the identification and valuation of intangibles acquired,
the Company also allocated approximately $19,000,000 to developed technology
and know-how. Developed technology represents patented and unpatented
technology and know-how and is being amortized over a period of 13 years and
relates to the InDuct Breast MicroCatheter, Aspirator and MicroDilator
products. During fiscal 2000, Pro Duct received FDA 510(k) marketing clearance
for the above mentioned products.

    The excess of the purchase price over the fair value of tangible and
identifiable intangible net assets of approximately $92,653,000 as of November
30, 2001 was allocated to goodwill. In accordance with SFAS No. 142, this amount
will not be systematically amortized but rather beginning in 2002, the Company
will perform an annual assessment for impairment by applying a fair-value-based
test.

     In connection with the acquisition, the Company has committed to a plan to
involuntary terminate certain employees of Pro Duct and abandon certain lease
facilities assumed. Accordingly, the Company has accrued severance and
severance related expenses of approximately $793,000 for employees to be
terminated. The Company has also accrued approximately $787,000 for the
abandonment of a lease facility, primarily included in non-current liabilites
in the accompanying balance sheet, representing the present value of future
minimum lease payments less estimated sub-lease receipts.

     The aggregate purchase price of approximately $183,898,000 including
acquisition cost was allocated as follows:

<TABLE>
<CAPTION>
                                                                     2001
                                                                (in thousands)
     <S>                                                        <C>
     Tangible net assets acquired, at fair value.....           $  13,272
     Deferred tax asset..............................               2,973
     In-process research and development.............              56,000
     Developed technology and know-how...............              19,000
     Goodwill........................................              92,653
                                                                ---------
                                                                $ 183,898
                                                                =========
</TABLE>

     Unaudited pro forma operating results for the Company, assuming the
acquisition occurred on January 1, 2000 and January 1, 2001, respectively, are
presented below. These pro forma amounts for both periods presented exclude the
one time charge of $56.0 million for in process research and development related
to the Pro Duct acquisition.

<TABLE>
<CAPTION>
                                                        Year  ending December 31,
                                                        -------------------------
                                                            2000        2001
                                                            ----        ----
                                                             (in thousands)
     <S>                                              <C>           <C>
     Net sales. ..................................... $  142,337    $  221,501
     Net income .....................................     30,670        59,628
     Net income per share -
      Basic..........................................       0.26          0.50
      Diluted........................................       0.25          0.47
</TABLE>

                                      F-14

<PAGE>
                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

(4) Allowance for Doubtful Accounts

    A summary of the allowance for doubtful accounts activity is as follows:

<TABLE>
<CAPTION>
                                                       December 31,
                                                --------------------------
                                                1999      2000        2001
                                                ----      ----        ----
                                                     (in thousands)
    <S>                                       <C>        <C>         <C>
    Balance, beginning of year..........        $913     $1,134      $1,510
    Amounts provided....................         299        656         567
    Amounts written off.................         (78)      (280)        (90)
                                              ------     ------      ------

    Balance, end of year................      $1,134     $1,510      $1,987
                                              ======     ======      ======
</TABLE>

(5) Inventories

    Inventories are stated at the lower of cost (first-in, first-out) or market
    and consist of the following:

<TABLE>
<CAPTION>
                                                     December 31,
                                                   ---------------
                                                   2000       2001
                                                   ----       ----
                                                    (in thousands)
    <S>                                           <C>       <C>
    Raw materials and work-in-process..........   $ 6,353    $6,377
    Finished goods.............................     4,740     4,321
                                                  -------   -------
                                                  $11,093   $10,698
                                                  =======   =======
</TABLE>

    Work-in-process and finished goods inventories consist of materials, labor
and manufacturing overhead.

(6) Property and Equipment

    Property and equipment is stated at cost and consists of the following:

<TABLE>
<CAPTION>
                                                              December 31,
                                                            ----------------
                                                            2000        2001
                                                            ----        ----
                                                             (in thousands)
       <S>                                                <C>         <C>
       Production equipment.............................  $ 6,688     $ 8,651
       Research equipment...............................      357         454
       Furniture, fixtures and computer equipment.......    8,366      11,835
       Leasehold improvements...........................    3,223       6,600
       Land.............................................      579         579
       Building.........................................    1,872       1,872
       Construction-in-process..........................    9,287       9,749
                                                          -------     -------
                                                           30,372      39,740
       Less--Accumulated depreciation and amortization..    9,009      13,078
                                                          -------     -------
                                                          $21,363     $26,662
                                                          =======     =======
</TABLE>

                                      F-15

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

(7) Accrued Expenses

    Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                           December 31,
                                         ----------------
                                         2000        2001
                                         ----        ----
                                         (in thousands)
    <S>                                 <C>        <C>
    Accrued compensation.............  $ 6,313     $ 8,334
    Accrued consulting fees..........    2,991       5,244
    Accrued legal fees...............      839         279
    Accrued sales and VAT taxes......    2,702       5,133
    Other accruals...................    2,875       5,799
                                       -------     -------
                                       $15,720     $24,789
                                       =======     =======
</TABLE>

(8) Income Taxes

     The Company provides for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes.  SFAS No. 109 requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of
temporary differences between the financial statement and tax base of assets
and liabilities, as measured by enacted tax rates assumed to be in effect when
these differences reverse.

     The Company has net operating losses for federal income tax purposes of
approximately $45.2 million at December 31, 2001 that will expire at various
dates beginning in 2017 and through 2020 if not utilized.

     The Company has research and development tax credit carryforwards for
federal income tax purposes of approximately $7.8 million at December 31, 2001
that will expire at various dates beginning in 2002 and through 2020. In
addition, the Company has an AMT tax credit carryforward for federal income tax
purposes of approximately $1.0 million.

     The net operating loss and research and development tax credit
carryforwards are subject to review by the Internal Revenue Service. Ownership
changes, as defined in the Internal Revenue Code, may limit the amount of these
tax attributes that can be utilized annually to offset future taxable income or
tax liabilities. The amount of the annual limitation is determined based on the
value immediately prior to the ownership change. Subsequent ownership changes
may further affect the limitation in future years.

     The approximate income tax effect of each type of temporary difference and
carryforward is as follows:

                                      F-16

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                          -------------------
                                                                          2000           2001
                                                                          ----           ----
    <S>                                                                  <C>          <C>
    Deferred tax assets:                                                    (in thousands)
      Net operating loss carryforwards...............................   $ 26,671      $16,797
      Research and development and other tax credit carryforwards....      5,274        7,834
      AMT tax credit carryforward....................................          -        1,019
      Capitalized research and development expenses..................      4,073        2,742
      Nondeductible accruals.........................................        754            -
      Bad debt reserve...............................................        448          742
      Employee benefit related reserves..............................        398        1,410
      Other temporary differences....................................        370          209
                                                                        --------      -------
        Deferred tax asset...........................................     37,988       30,753
                                                                        --------      -------
    Deferred tax liabilities:
      Acquired know-how..............................................          -       (7,268)
                                                                        --------      -------
      Valuation allowance............................................    (37,988)           -
                                                                        --------      -------

      Net deferred tax asset.........................................   $      -      $23,485
                                                                        ========      =======
</TABLE>

    The components of the Company's tax provision are as follows:

<TABLE>
<CAPTION>
                                              Year Ended December 31,
                                             ------------------------
                                             1999      2000       2001
                                             ----      ----       ----
      <S>                                  <C>        <C>       <C>
      Current
        Federal.........................   $     -    $    -    $   3,071
        Foreign.........................         -         -           41
        State...........................       130       853        1,447
                                           -------    ------    ---------
          Total current.................       130       853        4,559

      Deferred
        Federal.........................         -         -       20,320
        State...........................         -         -          194
                                           -------    ------    ---------
          Total deferred................         -         -       20,514
                                           -------    ------    ---------

      Total income tax provision........   $   130    $  853    $  25,073
                                           =======    ======    =========
</TABLE>

                                      F-17

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

A reconciliation of the federal statutory rate to the Company's effective tax
rate is as follows:

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                          -----------------------------
                                                                          1999        2000         2001
                                                                          ----        ----         ----
<S>                                                                      <C>          <C>        <C>
Income tax provision at federal statutory rate....................        35.0%       35.0%        35.0%
Research and development credit carryforwards.....................        (0.94)      (3.30)      (2.76)
Research and development write-off related to Pro Duct acquisition           -           -        51.75
Changes in valuation allowance....................................       (35.33)     (33.37)     (29.87)
State tax provision, net of federal benefit.......................         0.98        0.33        8.99
Other.............................................................         1.40        3.46        3.38
                                                                           ----        ----        ----
Effective tax rate................................................         1.11%       2.12%      66.49%
                                                                           =====       =====      ======
</TABLE>

(9) Stockholders' Equity

  (a) Common Stock Reserved

     As of December 31, 2001, the Company has reserved 22,297,088 shares of
common stock for issuance as follows:

<TABLE>
<CAPTION>
                                                       Number of
                                                         Shares
                                                         ------
<S>                                                    <C>
Employee and Director stock option plans............   21,269,803
Employee stock purchase plan........................    1,027,285
                                                       ----------
                                                       22,297,088
                                                       ==========
</TABLE>

  (b) Stock Splits

     In December 1999, the Board of Directors approved a two-for-one split of
the Company's common stock to be effected in the form of a 100% stock dividend.
The additional shares were distributed on or about January 31, 2000 to
stockholders of record on January 14, 2000. All share and per share data
presented herein have been retroactively restated to give effect to this stock
split.

     In January 2001, the Board of Directors approved a three-for-one split of
the Company's common stock to be effected in the form of a 200% stock dividend.
The additional shares were distributed on or about March 2, 2001 to
stockholders of record on February 16, 2001. All share and per share data
presented herein have been retroactively restated to give effect to this stock
split.

  (c) Preferred Stock

     The Company's bylaws provide for and the Board of Directors and
stockholders authorized 5,000,000 shares of $0.01 par value Preferred Stock.
The Board of Directors has the authority to issue such shares in one or more
series and to fix the relative rights and preferences without further vote or
action by the stockholders. The Board of Directors has no present plans to
issue any shares of Preferred Stock.

(d) Stockholders' Rights Plan

     On August 6, 1997 the Board of Directors declared a dividend of one
Preferred Stock purchase right for each outstanding share of the Company's
common stock to stockholders of record at the close of business on September 5,

                                      F-18

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

1997. Each right entitles the holder to purchase from the Company a unit
consisting of one one-hundredth of a share of Series A Junior Participating
Preferred Stock, $0.01 par value, at a purchase price of $110 per unit, subject
to adjustment.

(e) Warrants

     On January 1, 2000, the Company issued to Quest a warrant to purchase up
to 900,000 shares of common stock at an exercise price equal to $10.14 per
share.  The warrant was issued in consideration of entering into a multi-year
joint-marketing agreement. The warrant was exercised in full on June 6, 2001
using the cashless exercise feature and the Company issued Quest 494,400 shares
of the Company's common stock.

(10) Stock Option and Employee Stock Purchase Plans

     During 1995, the Board of Directors and stockholders approved the 1995
Stock Option Plan, (the "1995 Plan").  The aggregate number of shares of common
stock that may be issued pursuant to the 1995 Plan is 6,000,000 plus, effective
as of January 1, 1997 and each year thereafter, the excess, if any, of (i) five
percent of the total number of shares of common stock issued and outstanding as
of December 31 of the preceding year or then reserved for issuance upon the
exercise or conversion of outstanding options, warrants or convertible
securities, over (ii) the number of shares then remaining reserved and
available for grant under the 1995 Plan, subject to certain adjustments,
provided, however, that in no event shall more than 12,000,000 shares of common
stock be issued pursuant to incentive stock options under the 1995 Plan. At
December 31, 2001, 651,093 shares were available for future grant under the
1995 Plan.

     In January 1998 and 1999, the Company approved for grant an aggregate of
6,000 shares of common stock to six directors (500 shares each, vesting equally
each month during 1998 and 1999, respectively).  In January 2000, the Company
approved for grant an aggregate of 3,334 shares of common stock to seven
directors (500 shares each for five directors and 417 shares each for two
directors, vesting equally each month during 2000). In January 2001, the
Company approved for grant an aggregate of 3,625 shares of common stock to
eight directors (500 shares each for six directors, 250 for one director and
375 for one director vesting equally each month during 2001). As of December
31, 2001, options to purchase 438,696 shares of common stock were outstanding
under the 1989 Stock Plan. No further options may be issued under the 1989
Stock Option Plan.

     The Board of Directors and stockholders approved the 1995 Director Stock
Option Plan pursuant to which options to purchase up to 1,500,000 shares of
common stock were authorized for future issuance. In January 1996, the Company
granted options to purchase 630,000 shares of common stock to seven directors
under this plan. In January 1998 the Company granted options to purchase
270,000 common shares to three directors under the 1995 Director Option Plan.
In 2000 the Company granted options to purchase 360,000 common shares to four
directors under the 1995 Director Stock Option Plan. In 2001, the Company
granted options to purchase 180,000 common shares to two directors under the
1995 Director Stock Option Plan.  No further options may be issued under the
1995 Director Stock Option Plan. The Board of Directors and Stockholders
approved the 2001 Non-Employee Director Stock Plan pursuant to which options to
purchase up to 4,000,000 shares of common stock were authorized for future
issuance.  In 2001, the Company granted options to purchase 90,000 common
shares to one director under the 2001 Non-Employee Director Stock Option Plan.
At December 31, 2001, the Company had 3,910,000 shares available for future
grants under the 2001 Non-Employee Director Stock Option Plan.

                                      F-19

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

The following schedule summarizes the activity under the Company's stock option
plans for the three years ended December 31, 2001.

<TABLE>
<CAPTION>
                                                                                     Weighted
                                                                                      Average
                                          Number                                   Exercise Price
                                          of Shares       Range of Exercise Prices    per share
                                          ---------       ------------------------    ---------
<S>                                           <C>                 <C>                     <C>
Outstanding, December 31, 1998..........       11,013,906         $0.08  -- $ 5.58        $  2.29
  Granted...............................        2,962,500          2.33  --   7.83           3.50
  Exercised.............................       (1,493,856)         0.08  --   4.63           2.16
  Canceled..............................         (736,134)         0.08  --   6.01           3.01
                                                ---------         ----------------        -------

Outstanding, December 31, 1999..........       11,746,416          0.10  --   7.83           2.56
  Granted...............................        6,107,025          9.90  --  21.63          16.02
  Exercised.............................       (4,541,340)         9.17  --  22.77          15.56
  Canceled..............................         (924,489)         2.33  --  19.33           6.61
                                                ---------         ----------------        -------

Outstanding, December 31, 2000..........       12,387,612          0.10  --  21.63           9.16
  Granted...............................        6,704,379          5.55  --  29.52          23.13
  Exercised.............................       (2,736,117)         0.10  --  21.92           3.25
  Canceled..............................         (636,394)         0.44  --  25.20          14.91
                                                ---------         ----------------        -------

Outstanding, December 31, 2001..........       15,719,480         $0.10  -- $29.52         $15.80
                                               ==========         ================         ======

Exercisable, December 31, 2001..........        4,913,064         $0.10  -- $26.66         $ 9.22
                                               ==========         ================         ======
Exercisable, December 31, 2000..........        2,832,494         $0.10  -- $19.19         $ 3.51
                                               ==========         ================         ======
Exercisable, December 31, 1999..........        4,357,590         $0.10  -- $ 6.72         $ 2.02
                                               ==========         ================         ======
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 2001:

<TABLE>
<CAPTION>
                                       Options Outstanding                      Options Exercisable
                        -----------------------------------------------     -----------------------------
                                              Weighted
                                               Average         Weighted                          Weighted
                                              Remaining         Average                           Average
    Range of                              Contractual Life  Exercise price                    Exercise Price
 Exercise Prices        Number of Shares     (in years)        per share    Number of Shares     per share
 ---------------        ----------------     ----------        ---------    ----------------     ---------
<S>                        <C>                  <C>             <C>            <C>                <C>

$ 0.10 - $ 2.96            1,758,474            5.80            $ 1.98         1,304,113          $ 1.78
  2.98 -   4.50            2,058,777            6.37              3.73         1,548,135            3.85
  4.52 -  12.17            1,792,181            8.16             10.65           433,601            9.57
 13.17 -  16.98            1,771,327            8.51             15.33           307,627           15.57
 17.40 -  20.75            1,906,350            9.00             20.14           482,908           20.36
 20.96 -  21.63            1,617,525            4.13             21.62           398,082           21.63
 21.80 -  21.92            1,811,492            9.08             21.92           415,577           21.92
 22.40 -  26.66              947,429            9.75             24.32            23,021           23.13
 26.69 -  26.69            1,988,825            4.99             26.69                 -               -
 26.71 -  29.52               67,100            9.78             27.13                 -               -
                          ----------            ----           -------         ---------          ------

$ 0.10 - $29.52           15,719,480            7.20           $ 15.80         4,913,064          $ 9.22
                          ==========            ====           =======         =========          ======
</TABLE>

                                      F-20

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

     The weighted average fair market value of the stock options as of the date
of grant for the years ended December 31, 1999, 2000 and 2001, was $3.17,
$12.72 and $17.37 respectively.

     As a result of the acquisition of Pro Duct (Note 3(b)), the Company
recorded approximately $1,054,000 of deferred compensation as a component of
stockholders' equity related to the value of unvested stock options held by
employees of Pro Duct, which were exchanged for options to acquire the
Company's common stock. The Company is amortizing this amount over the
remaining vesting period of the stock options. During the year ended December
31, 2001, compensation expense related to these options totaled $55,000.

     In October 1995, the FASB issued SFAS No. 123, which requires the
measurement of the fair value of stock-based compensation to be included in the
statement of operations or disclosed in the notes to the financial statements.
The Company has determined that it will continue to account for stock-based
compensation for employees under APB Opinion No. 25, Accounting for Stock
Issued to Employees, and elect the disclosure-only alternative under SFAS No.
123 for stock-based compensation awarded in 1999, 2000 and 2001 using the
Black-Scholes option pricing model prescribed by SFAS No. 123. The underlying
assumptions used are as follows:

<TABLE>
<CAPTION>
                                                 December 31,
                                                --------------
                                          1999      2000      2001
                                        --------    ----      ----
<S>                                     <C>        <C>       <C>
     Risk-free interest rate...........   5.42%     6.07%     4.49%
     Expected dividend yield...........      -         -         -
     Expected lives....................   5.00      5.00      5.00
     Expected volatility...............     98%      105%       96%
</TABLE>

Had compensation cost for the Company's stock option plans and Employee Stock
Purchase Plan been determined consistent with SFAS No. 123, pro forma net
income and net income per share would have been:

<TABLE>
<CAPTION>
                                                                December 31,
                                                     -------------------------------------
                                                      1999           2000            2001
                                                     ------         ------          ------
                                                      (in thousands, except per share data)
<S>                                                   <C>           <C>            <C>
     Net income (loss)-
       As reported.............................       $5,640        $38,163        $12,635
       Pro forma...............................          164         21,450        (26,749)

     Net income per share, as reported--
       Basic...................................       $ 0.05        $  0.34        $  0.11
       Diluted.................................         0.05           0.32           0.10

     Net income (loss) per share, pro forma--
       Basic...................................       $    -        $  0.19        $ (0.23)
       Diluted.................................            -           0.18          (0.23)
</TABLE>

     During 1995, the Board of Directors and stockholders approved the 1995
Employee Stock Purchase Plan pursuant to which 1,440,000 shares of Common Stock
could be issued. Purchase price is determined by taking the lesser of 85% of
the closing price on the first or last day of the period.  During 2000, 50,025
shares of common stock were issued at the purchase prices of $12.92 and $14.67
per share.  During 2001, 61,280 shares of common stock were issued at the
purchase prices of $16.00 and $19.00 per share.

                                      F-21

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

As of December 31, 2001, 1,027,285 shares were available for future issuance
under the 1995 Employee Stock Purchase Plan.

(11) Commitments and Contingencies

  (a) Lease Commitments

     The Company leases its facilities under non-cancelable operating leases
which have expiration dates ranging from 2002 through 2011.

At December 31, 2001, future minimum annual lease payments under these leases
are as follows:

<TABLE>
<CAPTION>
                                                Amount
                                            --------------
                                            (in thousands)
         <S>                                <C>
         2002..............................     $ 2,543
         2003..............................       1,909
         2004..............................       1,524
         2005..............................         430
         2006..............................         227
         Thereafter........................         801
                                                -------
                                                $ 7,434
                                                =======
</TABLE>

Rent expense under operating leases totaled approximately $1,507,000,
$1,654,000 and $1,759,000 in 1999, 2000 and 2001, respectively.

  (b) Royalties

     The Company is the exclusive licensee of certain patented technology used
in the ThinPrep System. In consideration for this license, the Company has
agreed to pay a royalty equal to 1% of net sales of the ThinPrep Processor,
filter cylinder disposable products that are used with the ThinPrep System, and
improvements made by the Company relating to such items. In connection with
this license, royalty payments for the years ended December 31, 1999, 2000 and
2001 were approximately $439,000, $725,000 and $1,114,000, respectively.

  (c) Litigation

     In September 1999, the Company filed suit against TriPath for patent
infringement in relation to the Company's patent titled "Cell Preservative
Solution".  In January 2001, the Company and TriPath settled all litigation
between the two companies.  All claims and counterclaims against each other
pending were dismissed without prejudice.  The Company recorded $3.1 million in
2001 as other income relating to the settlement of the litigation.  The
consideration included shares of TriPath common stock, the value of which has
been recorded as a component of other assets in the accompanying balance sheet
due to certain restriction on selling such shares for a period of two years.

                                      F-22

<PAGE>

                                CYTYC CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001
                                   (Continued)

(12) Employee Benefit Plan

     The Company maintains an employee benefit plan under Section 401(k) of the
Internal Revenue Code. The plan allows for employees to defer a portion of
their salary up to the maximum allowed under IRS rules. The Company made
contributions to the Plan totaling approximately $132,000, $430,000 and
$777,000 related to the years ended December 31, 1999, 2000 and 2001,
respectively.

(13) Summary of Quarterly Data (Unaudited)

     A summary of quarterly data follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                2000 Quarter Ended
                                                ------------------
                                 March 31     June 30   September 30   December 31
                                 --------     -------   ------------   -----------
<S>                              <C>          <C>            <C>           <C>
Net sales...............         $28,778      $33,525        $37,209       $42,553
Gross profit............          23,472       27,412         31,343        35,273
Operating profit........           4,750        5,817         10,078        13,650
Net income..............           5,641        6,740         10,995        14,787
Net income per share:
  Basic.................            0.05         0.06           0.10          0.13
  Diluted...............            0.05         0.06           0.09          0.12
</TABLE>

<TABLE>
<CAPTION>
                                                2001 Quarter Ended
                                                ------------------
                                 March 31     June 30   September 30   December 31
                                 --------     -------   ------------   -----------
<S>                               <C>         <C>            <C>           <C>
Net sales.................        $47,467     $52,997        $57,249       $63,280
Gross profit..............         38,626      43,558         46,786        51,858
Operating profit (loss)...         16,516      20,279         22,903       (29,996)
Net income (loss).........         15,550      16,009         18,031       (36,955)
Net income (loss) per
share:
  Basic...................           0.14        0.14           0.16         (0.31)
  Diluted.................           0.13        0.13           0.15         (0.30)
</TABLE>

(14) Subsequent Event

Acquisition of Digene Corporation

     On February 19, 2002 the Company announced it had signed a definitive
agreement to acquire Digene in a stock and cash tender offer transaction. The
Company will issue 23 million shares of common stock and pay $76.9 million
in cash for all outstanding equity of Digene, representing an aggregate equity
value of the transaction of $553.7 million. The acquisition is expected to
close during the second quarter of 2002, at which time the Company anticipates
a charge of up to $65.0 million related to the in-process research and
development.

                                      F-23