##### 



---

---

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

FORM 10-Q

(Mark One)

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|   
|    |  | For the quarterly period ended December 31, 2002                                       

OR

|       |  |                                                                                         
|------ |  | ----------------------------------------------------------------------------------------
|[    ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|      
|       |  | For the transition period from  to                                                      

Commission file number 0-28194

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

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 52-1536128                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                              
|1201 Clopper Road
Gaithersburg, Maryland                       |  | 20878                               
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code (301) 944-7000

(Former name, former address and former fiscal year, if changed since last report)

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 the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date.

|                                       |  |                                          
|-------------------------------------- |  | -----------------------------------------
|Class                                  |  | Shares outstanding as of
February 3, 2003
|                                       |  |                                          
|Common Stock, par value $.01 per share |  | 18,117,385                               

---

---





---



##### 

\

DIGENE CORPORATION

INDEX TO FORM 10-Q

|                                            |                                                                                               |  |                                                                                               |    |      |   | 
|------------------------------------------- | --------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------- | -- | ---- | - | 
|                                            |                                                                                               |  |                                                                                               |    | Page
|                                            |                                                                                               |  |                                                                                               |    |     
|                                           
|Part I. Consolidated Financial Information: |                                                                                               |  |                                                                                               |   
|                                           
|                                            | Item 1. Consolidated Financial Statements                                                     |  |                                                                                               |    |     
|                                           
|                                            |                                                                                               |  | Consolidated Balance Sheets 
December 31, 2002 and June 30, 2002                             |    |      | 3 | 
|                                           
|                                            |                                                                                               |  | Consolidated Statements of Operations 
Three and six months ended December 31, 2002 and 2001 |    |      | 4 | 
|                                           
|                                            |                                                                                               |  | Consolidated Statements of Cash Flows 
Six months ended December 31, 2002 and 2001           |    |      | 5 | 
|                                           
|                                            |                                                                                               |  | Notes to Consolidated Financial Statements                                                    |    |      | 6 | 
|                                           
|                                            | Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations |  |                                                                                               | 9  |     
|                                           
|                                            | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |  |                                                                                               | 16 |     
|                                           
|                                            | Item 4. Controls and Procedures                                                               |  |                                                                                               | 16 |     
|                                           
|Part II. Other Information:                 |                                                                                               |  |                                                                                               |   
|                                           
|                                            | Item 1. Legal Proceedings                                                                     |  |                                                                                               | 17 |     
|                                           
|                                            | Item 6. Exhibits and Reports on Form 8-K                                                      |  |                                                                                               | 18 |     
|                                           
|Signatures                                  |                                                                                               |  | 19                                                                                            |   
|                                           
|Exhibit Index                               |                                                                                               |  | 22                                                                                            |   





---



##### 



PART I. Consolidated Financial Information

Item 1. Consolidated Financial Statements

DIGENE CORPORATION
CONSOLIDATED BALANCE SHEETS

|                                           |                                                                                                                                                                           |   |              |             |          |   |            |             |  
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------ | ----------- | -------- | - | ---------- | ----------- | -
|                                           |                                                                                                                                                                           |   | December 31, |             | June 30,
|                                           |                                                                                                                                                                           |   | 2002         |             | 2002    
|                                           |                                                                                                                                                                           |   |              |             |         
|                                           |                                                                                                                                                                           |   | (Unaudited) 
|ASSETS                                     |                                                                                                                                                                           |   |              |             |          |   |            |            
|Current assets:                            |                                                                                                                                                                           |   |              |             |          |   |            |            
|                                           | Cash and cash equivalents                                                                                                                                                 |   | $            | 7,944,798   |          |   | $          | 9,453,125   |  
|                                           | Short-term investments                                                                                                                                                    |   |              | 24,047,209  |          |   |            | 30,140,114  |  
|                                           | Accounts receivable, less allowance of approximately $408,856 and
$684,000 at December 31, 2002 and June 30, 2002, respectively                                           |   |              | 7,820,300   |          |   |            | 9,001,584   |  
|                                           | Inventories                                                                                                                                                               |   |              | 5,753,661   |          |   |            | 5,980,386   |  
|                                           | Prepaid expenses and other current assets                                                                                                                                 |   |              | 2,428,848   |          |   |            | 2,195,264   |  
|                                           |                                                                                                                                                                           |   |              |             |          |   |            |            
|Total current assets                       |                                                                                                                                                                           |   | 47,994,816   |             |          |   | 56,770,473 |            
|Property and equipment, net                |                                                                                                                                                                           |   | 7,203,013    |             |          |   | 7,398,637  |            
|Deferred costs, net                        |                                                                                                                                                                           |   | 1,169,197    |             |          |   | 1,345,763  |            
|Intangible assets, net                     |                                                                                                                                                                           |   | 900,515      |             |          |   | 900,515    |            
|Deposits                                   |                                                                                                                                                                           |   | 827,488      |             |          |   | 825,941    |            
|                                           |                                                                                                                                                                           |   |              |             |          |   |            |            
|Total assets                               |                                                                                                                                                                           | $ | 58,095,029   |             |          | $ | 67,241,329 |            
|                                           |                                                                                                                                                                           |   |              |             |          |   |            |            
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                                                                                                                                                           |   |              |             |          |   |            |            
|Current liabilities:                       |                                                                                                                                                                           |   |              |             |          |   |            |            
|                                           | Accounts payable                                                                                                                                                          |   | $            | 4,996,047   |          |   | $          | 6,496,406   |  
|                                           | Accrued expenses                                                                                                                                                          |   |              | 3,080,266   |          |   |            | 5,628,706   |  
|                                           | Accrued payroll                                                                                                                                                           |   |              | 2,689,679   |          |   |            | 2,864,436   |  
|                                           | Current portion of long-term debt                                                                                                                                         |   |              | 1,457,642   |          |   |            | 1,377,856   |  
|                                           | Current portion of deferred revenues                                                                                                                                      |   |              | 575,091     |          |   |            | 575,091     |  
|                                           |                                                                                                                                                                           |   |              |             |          |   |            |            
|Total current liabilities                  |                                                                                                                                                                           |   | 12,798,725   |             |          |   | 16,942,495 |            
|Deferred rent                              |                                                                                                                                                                           |   | 403,291      |             |          |   | 353,076    |            
|Deferred revenue, less current portion     |                                                                                                                                                                           |   | 1,328,933    |             |          |   | 1,616,478  |            
|Long-term debt                             |                                                                                                                                                                           |   | 2,873,235    |             |          |   | 3,690,496  |            
|Deferred liability                         |                                                                                                                                                                           |   |             |             |          |   | 5,000,000  |            
|Stockholders equity:                      |                                                                                                                                                                           |   |              |             |          |   |            |            
|                                           | Preferred stock, $0.10 par value, 1,000,000 shares authorized, no shares
issued and outstanding                                                                           |   |              |            |          |   |            |            |  
|                                           | Common stock, $0.01 par value, 50,000,000 shares authorized, 18,115,585
and 17,972,728 shares issued and outstanding at December 31, 2002
and June 30, 2002, respectively |   |              | 181,156     |          |   |            | 179,727     |  
|                                           | Additional paid-in capital                                                                                                                                                |   |              | 115,854,582 |          |   |            | 110,856,010 |  
|                                           | Deferred stock compensation                                                                                                                                               |   |              | (16,069     | )        |   |            | (32,137     | )
|                                           | Accumulated deficit                                                                                                                                                       |   |              | (75,328,824 | )        |   |            | (71,364,816 | )
|                                           |                                                                                                                                                                           |   |              |             |          |   |            |            
|Total stockholders equity                 |                                                                                                                                                                           |   | 40,690,845   |             |          |   | 39,638,784 |            
|                                           |                                                                                                                                                                           |   |              |             |          |   |            |            
|Total liabilities and stockholders equity |                                                                                                                                                                           | $ | 58,095,029   |             |          | $ | 67,241,329 |            
|                                           |                                                                                                                                                                           |   |              |             |          |   |            |            

See accompanying notes.

3



---



##### 



DIGENE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

|                                          |                                   |   |                    |            |                  |   |            |            |      |   |            |            |   |   |            |            |  
|----------------------------------------- | --------------------------------- | - | ------------------ | ---------- | ---------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                          |                                   |   | Three Months Ended |            | Six Months Ended
|                                          |                                   |   | December 31,       |            | December 31,    
|                                          |                                   |   |                    |            |                 
|                                          |                                   |   | 2002               |            | 2001             |   | 2002       |            | 2001
|                                          |                                   |   |                    |            |                  |   |            |            |     
|                                          |                                   |   | (Unaudited)        |            | (Unaudited)     
|Revenues:                                 |                                   |   |                    |            |                  |   |            |            |      |   |            |            |   |   |            |           
|                                          | Product sales                     |   | $                  | 14,207,489 |                  |   | $          | 11,115,574 |      |   | $          | 26,604,293 |   |   | $          | 21,088,133 |  
|                                          | Distribution contract             |   |                    |           |                  |   |            | 276,318    |      |   |            |           |   |   |            | 602,742    |  
|                                          | Other                             |   |                    | 242,079    |                  |   |            | 191,718    |      |   |            | 461,762    |   |   |            | 274,975    |  
|                                          |                                   |   |                    |            |                  |   |            |            |      |   |            |            |   |   |            |           
|Total revenues                            |                                   |   | 14,449,568         |            |                  |   | 11,583,610 |            |      |   | 27,066,055 |            |   |   | 21,965,850 |           
|Costs and expenses:                       |                                   |   |                    |            |                  |   |            |            |      |   |            |            |   |   |            |           
|                                          | Cost of product sales             |   |                    | 3,012,051  |                  |   |            | 2,944,555  |      |   |            | 6,187,390  |   |   |            | 5,965,588  |  
|                                          | Research and development          |   |                    | 2,125,890  |                  |   |            | 2,342,252  |      |   |            | 4,166,281  |   |   |            | 4,416,036  |  
|                                          | Selling and marketing             |   |                    | 6,683,861  |                  |   |            | 4,626,950  |      |   |            | 12,719,654 |   |   |            | 8,439,212  |  
|                                          | General and administrative        |   |                    | 4,180,461  |                  |   |            | 2,826,276  |      |   |            | 8,265,447  |   |   |            | 4,887,072  |  
|                                          | Amortization of intangible assets |   |                    |           |                  |   |            | 37,521     |      |   |            |           |   |   |            | 75,042     |  
|                                          |                                   |   |                    |            |                  |   |            |            |      |   |            |            |   |   |            |           
|Loss from operations                      |                                   |   | (1,552,695         | )          |                  |   | (1,193,944 | )          |      |   | (4,272,717 | )          |   |   | (1,817,100 | )         
|Other income (expense):                   |                                   |   |                    |            |                  |   |            |            |      |   |            |            |   |   |            |           
|                                          | Other income                      |   |                    | 55,245     |                  |   |            | 78,878     |      |   |            | 110,978    |   |   |            | 12,604     |  
|                                          | Interest income                   |   |                    | 163,058    |                  |   |            | 185,232    |      |   |            | 342,435    |   |   |            | 391,902    |  
|                                          | Interest expense                  |   |                    | (62,616    | )                |   |            | (2,530     | )    |   |            | (129,592   | ) |   |            | (5,085     | )
|                                          |                                   |   |                    |            |                  |   |            |            |      |   |            |            |   |   |            |           
|Loss from operations before income
taxes  |                                   |   | (1,397,008         | )          |                  |   | (932,364   | )          |      |   | (3,948,896 | )          |   |   | (1,417,679 | )         
|Provision for (benefit from) income
taxes |                                   |   | (57,042            | )          |                  |   | 141,620    |            |      |   | 15,112     |            |   |   | 191,310    |           
|                                          |                                   |   |                    |            |                  |   |            |            |      |   |            |            |   |   |            |           
|Net loss                                  |                                   | $ | (1,339,966         | )          |                  | $ | (1,073,984 | )          |      | $ | (3,964,008 | )          |   | $ | (1,608,989 | )         
|                                          |                                   |   |                    |            |                  |   |            |            |      |   |            |            |   |   |            |           
|Basic and diluted net loss per share      |                                   | $ | (0.07              | )          |                  | $ | (0.06      | )          |      | $ | (0.22      | )          |   | $ | (0.10      | )         
|                                          |                                   |   |                    |            |                  |   |            |            |      |   |            |            |   |   |            |           
|Weighted average shares outstanding       |                                   |   | 18,115,585         |            |                  |   | 17,021,779 |            |      |   | 18,115,585 |            |   |   | 16,906,678 |           
|                                          |                                   |   |                    |            |                  |   |            |            |      |   |            |            |   |   |            |           

See accompanying notes.

4



---



##### 



DIGENE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                     |                                                                                           |                                                         |                                           |            |                  |            |            |            |         |            |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------------------- | ---------- | ---------------- | ---------- | ---------- | ---------- | ------- | ---------- | -
|                                                     |                                                                                           |                                                         |                                           |            | Six Months Ended
|                                                     |                                                                                           |                                                         |                                           |            | December 31,    
|                                                     |                                                                                           |                                                         |                                           |            |                 
|                                                     |                                                                                           |                                                         |                                           |            | 2002             |            | 2001      
|                                                     |                                                                                           |                                                         |                                           |            |                  |            |           
|                                                     |                                                                                           |                                                         |                                           |            | (Unaudited)     
|Operating activities                                 |                                                                                           |                                                         |                                           |            |                  |            |            |           
|                                                     | Net loss                                                                                  |                                                         | $                                         | (3,964,008 | )                |            | $          | (1,608,989 | )      
|                                                     | Adjustments to reconcile net loss to net cash (used in)
provided by operating activities: |                                                         |                                           |            |                  |            |            |            |        
|                                                     |                                                                                           | Depreciation and amortization of property and equipment |                                           |            | 1,480,609        |            |            |            | 812,853 |           
|                                                     |                                                                                           | Amortization of intangible assets                       |                                           |            |                 |            |            |            | 75,043  |           
|                                                     |                                                                                           | Compensation expense related to stock options           |                                           |            | 16,069           |            |            |            | 16,068  |           
|                                                     |                                                                                           | Changes in operating assets and liabilities:            |                                           |            |                  |            |            |            |         |           
|                                                     |                                                                                           |                                                         | Accounts receivable                       |            |                  | 1,181,284  |            |            |         | (1,571,809 | )
|                                                     |                                                                                           |                                                         | Inventories                               |            |                  | 226,725    |            |            |         | 159,960    |  
|                                                     |                                                                                           |                                                         | Prepaid expenses and other current assets |            |                  | (233,584   | )          |            |         | 219,617    |  
|                                                     |                                                                                           |                                                         | Deferred costs                            |            |                  | 176,566    |            |            |         |           |  
|                                                     |                                                                                           |                                                         | Deposits                                  |            |                  | (1,547     | )          |            |         | (28,794    | )
|                                                     |                                                                                           |                                                         | Accounts payable                          |            |                  | (1,500,359 | )          |            |         | 1,987,489  |  
|                                                     |                                                                                           |                                                         | Accrued expenses                          |            |                  | (2,548,440 | )          |            |         | 2,547,741  |  
|                                                     |                                                                                           |                                                         | Accrued payroll                           |            |                  | (174,757   | )          |            |         | (320,023   | )
|                                                     |                                                                                           |                                                         | Deferred revenues                         |            |                  | (287,545   | )          |            |         | 817,000    |  
|                                                     |                                                                                           |                                                         | Deferred rent                             |            |                  | 50,215     |            |            |         | 69,278     |  
|                                                     |                                                                                           |                                                         |                                           |            |                  |            |            |           
|Net cash (used in) provided by operating activities  |                                                                                           |                                                         | (5,578,772                                | )          |                  |            | 3,175,434  |           
|Investing activities                                 |                                                                                           |                                                         |                                           |            |                  |            |            |           
|                                                     | Purchases of short-term investments                                                       |                                                         |                                           | (1,022,450 | )                |            |            | (8,880,174 | )      
|                                                     | Maturities of short-term investments                                                      |                                                         |                                           | 7,115,355  |                  |            |            | 7,269,233  |        
|                                                     | Capital expenditures                                                                      |                                                         |                                           | (1,284,985 | )                |            |            | (1,205,527 | )      
|                                                     |                                                                                           |                                                         |                                           |            |                  |            |            |           
|Net cash provided by (used in) investing activities  |                                                                                           |                                                         | 4,807,920                                 |            |                  |            | (2,816,468 | )         
|Financing activities                                 |                                                                                           |                                                         |                                           |            |                  |            |            |           
|                                                     | Exercise of common stock options                                                          |                                                         |                                           |           |                  |            |            | 4,177,401  |        
|                                                     | Principal repayments of long-term debt                                                    |                                                         |                                           | (737,475   | )                |            |            |           |        
|                                                     |                                                                                           |                                                         |                                           |            |                  |            |            |           
|Net cash (used in) provided by financing activities  |                                                                                           |                                                         | (737,475                                  | )          |                  |            | 4,177,401  |           
|                                                     |                                                                                           |                                                         |                                           |            |                  |            |            |           
|Net (decrease) increase in cash and cash equivalents |                                                                                           |                                                         | (1,508,327                                | )          |                  |            | 4,536,367  |           
|Cash and cash equivalents at beginning of period     |                                                                                           |                                                         | 9,453,125                                 |            |                  |            | 20,626,252 |           
|                                                     |                                                                                           |                                                         |                                           |            |                  |            |            |           
|Cash and cash equivalents at end of period           |                                                                                           | $                                                       | 7,944,798                                 |            |                  | $          | 25,162,619 |           
|                                                     |                                                                                           |                                                         |                                           |            |                  |            |            |           

See accompanying notes.

5



---



##### 



DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The consolidated financial statements of Digene Corporation (Digene) for the
three- and six-month periods ended December 31, 2002 and 2001 are unaudited and
include all adjustments which, in the opinion of management, are necessary to
present fairly the results of operations for the periods then ended. All such
adjustments are of a normal recurring nature. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K for the
year ended June 30, 2002 filed with the Securities and Exchange Commission.

The results of operations for any interim period are not necessarily indicative
of the results of operations for any other interim period or for a full fiscal
year.

2.     Inventories

Inventories are stated at the lower of cost or market on a standard cost basis,
which approximates average cost.

Inventories consist of the following:

|                |  |              |            |          |  |   |            |  
|--------------- |  | ------------ | ---------- | -------- |  | - | ---------- | -
|                |  | December 31, |            | June 30,
|                |  | 2002         |            | 2002    
|                |  |              |            |         
|                |  | (Unaudited) 
|Finished goods  |  | $            | 3,844,037  |          |  | $ | 2,388,153  |  
|Work in process |  |              | 2,852,733  |          |  |   | 3,460,359  |  
|Raw materials   |  |              | 975,648    |          |  |   | 1,339,470  |  
|                |  |              |            |          |  |   |            |  
|                |  |              | 7,672,418  |          |  |   | 7,187,982  |  
|Reserves        |  |              | (1,918,757 | )        |  |   | (1,207,596 | )
|                |  |              |            |          |  |   |            |  
|                |  | $            | 5,753,661  |          |  | $ | 5,980,386  |  
|                |  |              |            |          |  |   |            |  

3.     Distribution Agreement

On April 29, 2001, Digene entered into a letter agreement with Roche Molecular
Systems (the Roche Distribution Contract), which established Roche Molecular
Systems (Roche) as the co-exclusive distributor of Digenes human
papillomavirus (HPV) products in Europe, Africa and the Middle East from May
1, 2001 through June 30, 2002. In June 2002, Digene adopted as its sole
strategy for the distribution of its HPV products in Europe, Africa and the
Middle East, a combination of direct distribution through its European
infrastructure and the use of local distributors and agents. On June 30, 2002,
the term of the Roche Distribution Contract expired, subject to a non-exclusive
wind-down period. On December 20, 2002, Roche and Digene amended the Roche
Distribution Contract to terminate the wind-down period on December 31, 2002
and to establish the procedures for Digenes repurchase from Roche of HPV-related
testing equipment

6



---



##### 



purchased from Digene by Roche under the Roche Distribution
Contract. The repurchase price for the equipment in use for HPV testing in
customers laboratories is the equipments December 31, 2002 depreciated value,
which is the net selling price less any amounts Roche recorded as depreciation
based on a straight-line basis over a four-year period. The repurchase price
for the equipment in inventory is a discount from the transfer price paid by
Roche under the Roche Distribution Contract. The parties consummated the HPV
equipment repurchase on January 6, 2003, subject to a reconciliation review
scheduled to be completed in March 2003.

Commencing in the fourth quarter of fiscal 2002, Digene deferred recognition of
revenue from HPV equipment sold to Roche under the Roche Distribution Contract.
Equipment sold to Roche during the fourth quarter of fiscal 2002 had a sales
price of $2.3 million and a cost of $1.4 million, which amounts were recorded
as deferred revenue and deferred costs, respectively, during that quarter. The
deferred revenue and deferred costs were being amortized over a four-year
period beginning in April 2002 to other revenue (as equipment rental) and
selling and marketing expenses, respectively. For the three-month period ended
December 31, 2002, Digene recorded other revenue and selling and marketing
expenses of $144,000 and $88,000, respectively related to the amortization of
these balances. Based upon the aforementioned repurchase of equipment from
Roche in January 2003, the remaining deferred revenue and deferred costs will
be written off in the third quarter of fiscal 2003 against the cost of the
acquired equipment.

4.     Intangible Assets

In July 2002, Digene adopted Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets(SFAS 142), which requires companies
to stop amortizing goodwill and certain intangible assets with an indefinite
useful life. Instead, SFAS 142 requires that goodwill and intangible assets
deemed to have an indefinite useful life be reviewed for impairment upon
adoption of SFAS 142 (January 1, 2002) and annually thereafter. Digene will
perform its annual impairment review during the fourth quarter of each year,
commencing with the fourth quarter of fiscal 2003.

Under SFAS 142, goodwill impairment is deemed to exist if the net book value of
a reporting unit (i.e., the level of the consolidated business at which
goodwill impairment is measured) exceeds its estimated fair value. This
methodology differs from Digenes previous policy, as permitted under
accounting standards existing at that time, of using discounted and
undiscounted future cash flows as a basis to determine if goodwill is
recoverable. There was no impact on the carrying value of Digenes intangible
assets upon adoption of SFAS 142. Digene does not have any intangible assets,
other than goodwill, which had a net book value of $900,515 at December 31,
2002.

7



---



##### 



The historical results of operations for the three- and six- months ended
December 31, 2001 do not reflect the provisions of SFAS 142. Had Digene adopted
SFAS 142 on July 1, 2001, the historical net loss would have been changed to
the adjusted amounts indicated below (in thousands):

|                               |  |   |                    |            |                    |   |                   |       |                    |   |            |            |                   |   |       |       |  
|------------------------------ |  | - | ------------------ | ---------- | ------------------ | - | ----------------- | ----- | ------------------ | - | ---------- | ---------- | ----------------- | - | ----- | ----- | -
|                               |  |   | Three Months Ended |            | Six Months Ended  
|                               |  |   | December 31, 2001  |            | December 31, 2001 
|                               |  |   |                    |            |                   
|                               |  |   |                    |            |                    |   | Basic and diluted |       |                    |   |            |            | Basic and diluted
|                               |  |   | Net Loss           |            | net loss per share |   | Net Loss          |       | net loss per share
|                               |  |   |                    |            |                    |   |                   |       |                   
|As reported  historical basis |  | $ | (1,073,984         | )          |                    | $ | (0.06             | )     |                    | $ | (1,608,989 | )          |                   | $ | (0.10 | )    
|Add: Goodwill amortization     |  |   | 37,521             |            |                    |   | 0.00              |       |                    |   | 75,042     |            |                   |   | 0.01  |      
|                               |  |   |                    |            |                    |   |                   |       |                    |   |            |            |                   |   |       |      
|Adjusted                       |  |   | $                  | (1,036,463 | )                  |   | $                 | (0.06 | )                  |   | $          | (1,533,947 | )                 |   | $     | (0.09 | )
|                               |  |   |                    |            |                    |   |                   |       |                    |   |            |            |                   |   |       |      

5.     Reclassifications

Certain prior year amounts have been reclassified to conform to current year
presentation.

8



---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The following discussion of our financial condition and results of operations
should be read in conjunction with our Consolidated Financial Statements and
the related Notes thereto included elsewhere in this report and in our Annual
Report on Form 10-K for the year ended June 30, 2002. Some of the information
that follows are not statements of historical fact, but merely reflect our
intent, belief or expectations regarding the anticipated effect of events,
circumstances and trends. Such statements should be considered as
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. We believe that our expectations are based on
reasonable assumptions within the bounds of our knowledge of our business and
operations. Factors that might cause or contribute to differences between our
expectations and actual results include: uncertainty of market acceptance of
our products by the worldwide medical community; uncertainty of future
profitability and cash generation from operations; our ability to obtain
requisite additional financing to fund our operations beyond calendar year
2003; our limited sales and marketing experience; the extent of future
expenditures for sales and marketing programs; delay in or failure to obtain
regulatory approvals for our products in development; uncertainty regarding
patents and proprietary rights in connection with our products and products in
development; dependence on third-party reimbursement from government entities,
managed care organizations and private insurance plans; risk that other
companies may develop and market HPV Tests competitive with our own; risks
inherent in international transactions, including those relating to our
expansion in Europe and elsewhere; our ability to scale up our manufacturing to
the extent product sales increase; uncertainty of clinical trial results for
our products in development; and other factors as set forth under the caption
Additional Considerations in our Annual Report on Form 10-K for the year
ended June 30, 2002.

Overview

Since our incorporation in 1987, we have devoted substantially all of our
resources to developing, manufacturing and marketing our proprietary gene-based
testing systems using our patented Hybrid Capture® technology for the
screening, monitoring and diagnosis of human diseases. Since our inception, we
have incurred substantial operating losses, resulting principally from expenses
associated with our research and development programs, including preclinical
studies, clinical trials and regulatory submissions for our products, the
expansion of our manufacturing facilities and our global sales and marketing
activities.

Our revenues to a significant extent have been derived from the sales of our
HPV Tests, which, for fiscal year 2002, accounted for 74% of total revenues
and, for the six months ended December 31, 2002, accounted for 79% of total
revenues. We expect that the growing acceptance of our HPV Tests in both the
United States and abroad will continue to drive the growth in revenues from our
HPV Tests and testing services in the future.

In fiscal 2002, our gross margins improved substantially over the prior fiscal
year. In the current fiscal year, we believe that we will be able to sustain
gross margins consistent with, or better than, fiscal 2002 as we continue to scale up our manufacturing operations and realize
expanded margins as a result of our direct distribution efforts in Europe.

9



---



##### 



We believe that increasing our investment in sales and marketing and
refocusing our investment in research and development is
essential to allow us to capitalize more fully on the potential of our HPV
Tests and our core technology. We expect to continue to invest heavily in our
direct European distribution operation during fiscal 2003 and beyond while also
expanding our direct sales organization in the United States. We also expect to
moderately increase our expenditures in the development of our next-generation
Hybrid Capture platforms and clinical trial activities for human papillomavirus
screening in fiscal 2003 as compared to fiscal 2002.

Our sales and marketing expenditures have been and will continue to be focused
on accelerating the adoption of human papillomavirus testing worldwide. We
intend to capitalize on the growing acceptance of our HPV Tests in the United
States and internationally by physicians, laboratories and health insurance
providers by materially increasing expenditures on sales and marketing over the
next several quarters. The increase in such expenditures will be primarily
directed at expanded direct sales and marketing efforts in Europe and the
United States.

We expect our general and administrative expenses will increase to provide
adequate infrastructure to support greater sales and marketing activities and
more focused research and development activities, to pay the anticipated
expenses associated with our ongoing litigation matters and to support the
overall growth of our business.

As a result of these anticipated increases in expenditures, we expect our
operating losses to continue through fiscal 2003 with a turn to profitability
near the end of fiscal 2003. There can be no assurance that we will meet this
goal.

Results of Operations

Product sales increased 28% to approximately $14,207,000 for
the three-month period ended December 31, 2002 from approximately $11,116,000
for the corresponding period in 2001. The increase was due primarily to a 34%
growth in sales of our HPV Tests and testing services over such sales in the
corresponding period in 2001, partially offset by decreases in sales of
equipment and non-core products. The majority of the growth in HPV products
sales was in the United States (79% over such sales in the corresponding period
in 2001), which was partially offset primarily by a decrease in equipment sales
to distributors in Europe, Africa and the Middle East as we transitioned to our
direct-European distribution.

Product sales increased 26% to approximately $26,604,000 for
the six-month period ended December 31, 2002 from approximately $21,088,000 for
the corresponding period in 2001. The increase was due primarily to a 37%
growth in sales of our HPV Tests and testing services over such sales in the
corresponding period in 2001, partially offset by decreases in sales of
equipment and non-core products. The majority of the growth in HPV products
sales was derived from the United States (73% over such sales in the
corresponding period in 2001), which was partially offset by a decrease in
equipment sales to distributors in Europe, Africa and the Middle East.

During the first six months of fiscal 2002 we recognized revenue of
approximately $603,000 related to minimum purchase guarantees under the Roche
Distribution Contract. Under the Roche Distribution Contract, Roche has no
further minimum purchase obligations after June 30, 2002, which may adversely
affect our product revenues unless this can be offset by increased product
sales

10



---



##### 



from other sources. Please see Liquidity and Capital Resources below
for a description of the Roche Distribution Contract.

Other revenues include research and development contract revenues, equipment
rental revenues and licensing revenues. Other revenues increased to
approximately $242,000 for the three-month period ended December 31, 2002 from
approximately $192,000 for the corresponding period in 2001. Other revenues
increased to approximately $462,000 for the six-month period ended December 31,
2002 from approximately $275,000 for the corresponding period in 2001. The
increase for both periods was due primarily to the partial recognition of
equipment sales to Roche in Europe, which were initially deferred in the fourth
quarter of fiscal 2002.

Cost of product sales increased 2% to approximately $3,012,000 for the
three-month period ended December 31, 2002 from approximately $2,945,000 for
the corresponding period in 2001 and increased almost 4% to approximately
$6,187,000 for the six-month period ended December 31, 2002 from approximately
$5,966,000 for the corresponding period in 2001. Gross margin on product sales
increased to 79% for the three-month period ended December 31, 2002 from 74%
for the corresponding period in 2001 and increased to 77% for the six-month
period ended December 31, 2002 from 72% for the corresponding period in 2001.
The increase in gross margin percentage was due primarily to increased sales of
our test products, particularly HPV Tests, principally in the United States
where we sell such products directly. In addition, European margins increased
due to substantially lower sales of equipment, which have lower margins than
our test products, and pricing increases as a result of our change primarily to
a direct sales approach in the region. During fiscal 2003, we have increased
our reserves for spoilage and damaged products in the amount of $375,000 in the
first quarter and $317,000 in the second quarter.

Research and development expenses decreased 9% to approximately $2,126,000 for
the three-month period ended December 31, 2002 from approximately $2,342,000
for the corresponding period in 2001 and decreased 6% to approximately $4,166,000
for the six-month period ended December 31, 2002 from
approximately $4,416,000 for the corresponding period in 2001. The decrease
for the three-month period was due primarily to a 43% decrease in costs of
laboratory supplies and an 11% decrease in personnel costs, partially offset by
a 79% increase in outside professional services. The decrease for the six-month
period was due primarily to a 39% decrease in costs of laboratory supplies and
a 5% decrease in personnel costs, partially offset by a 40% increase in outside
professional services. Our research and development activities focus on our
platform technology, including different or modified uses of such technology,
and improvements to our diagnostic test and equipment products. Because our
research and development expenditures tend to benefit multiple product
offerings, we do not account for research and development expenses on a
per-product or per-disease target basis.

During the six-month period ended December 31, 2002, we focused our research
and development activities on support and improvement of existing product lines
and the development of several new products. Work was completed on a procedural
modification to our Hybrid Capture 2 assay designed to improve test accuracy,
which is currently being validated in a clinical study. We also completed the
development of an improved quality control tool to be used by our
laboratory customers in the quality control monitoring of luminometers used to
measure results from Hybrid Capture 2 testing. Work is continuing on the
development of our Rapid Capture System for automated processing of Hybrid
Capture HPV Tests; the development of methods to improve

11



---



##### 



specimen processing procedures and throughput, including procedures for the improved processing of
PreservCyt® (Cytyc Corporation) specimens for high throughput HPV, chlamydia
(CT), and gonorrhea (GC) testing; improved equipment for faster specimen
processing; and the development of our Universal Collection Medium (UCM)
that is expected to allow simultaneous testing for HPV, CT/GC and of other
genetic and cellular material from a single patient sample. Clinical trials are
underway to validate the use of CT/GC testing from Cytycs ThinPrep® specimens,
the HPV Rapid Capture System, and the HPV ThinPrep application using cervical
specimens collected with a brush spatula device. Development is continuing on
our next generation of Hybrid Capture technology, initially for the improved
detection of HPV and herpes simplex virus (HSV) and the evaluation of certain
molecular markers to complement our HPV Tests in cervical screening
applications. We are continuing several basic research programs with the
goal of developing improved molecular diagnostic assay systems for the
detection of HPV and other targets of interest in the area of womens cancers
and infectious diseases.

As part of our research and development activities, we submitted a PMA
Supplement Amendment to the U.S. Food and Drug Administration (FDA) in
September 2002 to obtain market approval for the use of our Hybrid Capture 2
HPV Test in conjunction with the Pap test in cervical cancer screening for
women aged 30 and older. We have provided additional information to the FDA as
requested through letters and at meetings with FDA.

Selling and marketing expenses
increased 44% to approximately $6,684,000
 for the three-month period ended December 31, 2002 from
approximately $4,627,000 for the corresponding period in 2001 and
increased 51% to
approximately $12,720,000 for the six-month period ended
December 31, 2002 from approximately $8,439,000 for the corresponding period in
2001. The increase for the three-month period was due primarily to personnel
costs, which increased approximately $730,000 (51%), professional
expenses, which increased approximately $370,000 (210%), and
agency fees, which increased approximately $331,000 (85%). In
addition, depreciation expense increased approximately $393,000 (170%) for the three-month period due primarily to the May 2002 repurchase of
equipment placed with customers by Abbott Laboratories (Abbott) upon
expiration of the non-exclusive wind-down period of our distribution agreement
with Abbott (the Abbott Agreement). The increase for the six-month period
ended December 31, 2002 was due primarily to personnel costs, which increased
approximately $1,549,000 (60%), professional expenses, which
increased approximately $410,000 (103%), agency fees, which
increased approximately $442,000 (52%), and depreciation expense,
which increased approximately $810,000 (193%) due primarily to
the repurchase of equipment from Abbott. Geographically, the majority of the
increase in our selling and marketing expenses for the six-month period,
excluding royalties, was incurred in Europe, which increased approximately
$2,202,000 (108%) over the corresponding period in 2001 as we
established subsidiaries, hired employees and continued to develop a
distribution infrastructure, and in the United States, which increased
approximately $1,875,000 (40%) over the corresponding period
in 2001. We expect our selling and marketing expenses to
continue to increase during fiscal 2003 as we establish direct sales and
marketing operations in Europe due to the expiration, on April 30, 2002, of
Abbotts non-exclusive distribution wind-down period under the Abbott Agreement
for our HPV and CT/GC products in Europe, Africa and the Middle East and the
expiration of the Roche Distribution Contract on June 30, 2002, and as we
expand our direct sales organization in the United States to increase HPV
product sales and commercialize our CT/GC

12



---



##### 



products. We also expect that
compliance with the European Union CE marking regulations will be
capital-intensive in 2003.

General and administrative expenses
increased 48% to approximately $4,180,000
 for the three-month period ended December 31, 2002 from
approximately $2,826,000 for the corresponding period in 2001 and
increased  69% to
approximately $8,265,000 for the six-month period ended
December 31, 2002 from approximately $4,887,000 for the corresponding period in
2001. The increase was due primarily to professional fees, which increased
approximately $929,000 (121%) and approximately $2,713,000
(219%) for the three- and six-month periods, respectively,
principally attributable to a $2,278,000 increase in legal fees for the
six-month period primarily associated with various litigation matters, and
insurance expense, which increased approximately $201,000 (84%)
for the six-month period, principally related to directors and officers
insurance coverage. The increase in general and administrative expenses was
also attributable to an increase in personnel costs, which increased
approximately $359,000 (26%) and approximately $635,000
(26%) for the three- and six-month periods, respectively.
Geographically, the majority of the increase in general and administrative
expenses for the six-month period was incurred in the United States, which
increased approximately $2,281,000 (49%), due primarily to the
aforementioned litigation expenditures, over the corresponding period in 2001,
and Europe, which increased approximately $1,020,000 (590%) over
the corresponding period in 2001 due to our change to direct distribution.

Interest income decreased to approximately $163,000 for the three-month period
ended December 31, 2002 from approximately $185,000 for the corresponding
period in 2001 and decreased to approximately $342,000 for the six-month period
ended December 31, 2002 from approximately $392,000 for the corresponding
period in 2001. The decrease was primarily due to lower interest rates in
fiscal 2003 compared to the corresponding periods in fiscal 2002, partially
offset by an increase in average cash balances in the fiscal 2003 periods.

Liquidity and Capital Resources

Since inception, our expenses have significantly exceeded our revenues,
resulting in an accumulated deficit of approximately $75,329,000 at December
31, 2002. We have funded our operations primarily through the sale of equity
securities and revenues from product sales and research and development
contracts. At December 31, 2002, we had cash, cash equivalents and short-term
investments aggregating approximately $31,992,000. We had negative
cash flows from operations of approximately $5,579,000 for the six months
ending December 31, 2002 as compared to positive cash flows from operations of
approximately $3,175,000 for the six months ending December 31, 2001. The
negative cash flow for the six months ending December 31, 2002 is primarily the
result of our scheduled payment under the Co-Promotion Agreement with Cytyc
Corporation (Cytyc) and non-recurring payments to professionals related to
our terminated merger transaction with Cytyc, all of which were accrued during fiscal 2002.
The positive cash flow for the three months ending December 31, 2001 is
partially a result of advance minimum sales payments from Roche under the Roche
Distribution Contract.

Capital expenditures increased to approximately $1,285,000 for the six months
ended December 31, 2002 from approximately $1,206,000 for the corresponding
period in 2001.

13



---



##### 



On April 29, 2001, we entered into the Roche Distribution Contract, which
established Roche as the co-exclusive distributor of our HPV products in
Europe, Africa and the Middle East from May 1, 2001 through June 30, 2002. In
June 2002, we adopted as our sole strategy for the distribution of our HPV
products in Europe, Africa and the Middle East, a combination of direct
distribution through our European infrastructure and the use of local
distributors and agents. On June 30, 2002, the term of the Roche Distribution
Contract expired, subject to a non-exclusive wind-down period. Under the Roche
Distribution Contract, Roche made a non-refundable payment of $5.0 million to
Digene, which was recorded as a deferred liability on the Consolidated Balance
Sheet as of June 30, 2002. On July 1, 2002, consistent with the provisions of
the Roche Distribution Contract, this payment was converted into 142,857 shares
of Digene common stock at a conversion price of $35. On December 20, 2002, we
amended the Roche Distribution Contract to terminate the wind-down period on
December 31, 2002 and to establish the procedures for our repurchase from Roche
of HPV-related testing equipment purchased from us by Roche under the Roche
Distribution Contract. The repurchase price for the equipment in use for HPV
testing in customers laboratories is the equipments December 31, 2002
depreciated value, which is the net selling price less any amounts Roche
recorded as depreciation based on a straight-line basis over a four-year
period. The repurchase price for the equipment in inventory is a discount from
the transfer price paid by Roche under the Roche Distribution Contract. The
parties consummated the HPV equipment repurchase on January 6, 2003, subject to
a reconciliation review scheduled to be completed in March 2003.

Commencing in the fourth quarter of fiscal 2002, we deferred recognition of
revenue from equipment sold to Roche under the Roche Distribution Contract.
Equipment sold to Roche in the fourth quarter of fiscal 2002 had a sales price
of $2.3 million and a cost of $1.4 million, which amounts were recorded as
deferred revenue and deferred costs, respectively, during that quarter. The
deferred revenue and deferred costs were being amortized over a four-year
period beginning in April 2002 to other revenue (as equipment rental) and
selling and marketing expenses, respectively. For the six months ended December
31, 2002, we recorded other revenue and selling and marketing expenses of
$288,000 and $177,000, respectively, related to the amortization of these
balances. Based upon the aforementioned repurchase of equipment from Roche in
January 2003, the remaining deferred revenue and deferred costs will be written
off in the third quarter of fiscal 2003 against the cost of the acquired
equipment.

We anticipate that working capital requirements will increase moderately for
the foreseeable future due to the investment necessary to support our European
direct distribution operations, including the January 2003 buy back from Roche
of equipment in Europe, as well as increasing accounts receivable as a result
of expected revenue growth. We have incurred negative cash flows from
operations since our inception, and have expended, and expect to continue to
expend in the future, substantial funds to complete our planned product
development efforts, expand our sales and marketing activities and expand our
manufacturing capabilities. We expect that our existing capital resources will
be adequate to fund our operations through calendar year 2003. Our future
capital requirements and the adequacy of available funds may change, however, based on
numerous factors, including our degree of success in commercializing our
products, progress in our product development efforts and the magnitude and
scope of such efforts, progress with preclinical studies and clinical trials,
progress in our regulatory affairs activities, the cost and timing of expansion
of our manufacturing capabilities, the development and maintenance of effective
sales and marketing activities, the cost of filing, prosecuting, defending and
enforcing patent claims and other intellectual property rights, competing
technological and market developments, and the development and

14



---



##### 



maturation of strategic alliances for the marketing of our products. To the extent that our
existing capital resources and funds generated from operations are insufficient
to meet current or planned operating requirements, we will be required to
obtain additional funds through equity or debt financing, strategic alliances
with corporate partners and others, or through other sources. We do not have
any committed sources of additional financing, and there can be no assurance
that additional funding, if necessary, will be available on acceptable terms,
if at all. If adequate funds are not available, we may be required to delay,
scale back or eliminate certain aspects of our operations or attempt to obtain
funds through arrangements with collaborative partners or others that may
require us to relinquish rights to certain of our technologies, product
candidates, products or potential markets. Under such conditions, our
business, financial condition and results of operations will be materially
adversely affected.

We have summarized below our material contractual obligations as of December
31, 2002 (in thousands):

|                                   |  |       |        |          |  |             |       |            |  |         |        |            |  |   |       |  |  |   |       | 
|---------------------------------- |  | ----- | ------ | -------- |  | ----------- | ----- | ---------- |  | ------- | ------ | ---------- |  | - | ----- |  |  | - | ----- | 
|                                   |  |       |        |          |  | Less Than   |       | One to     |  | Four to |        | After Five
|Contractual Obligations            |  | Total |        | One Year |  | Three Years |       | Five Years |  | Years  
|                                   |  |       |        |          |  |             |       |            |  |        
|Long-term debt                     |  | $     | 4,331  |          |  | $           | 1,458 |            |  | $       | 2,356  |            |  | $ | 226   |  |  | $ | 291   | 
|                                   |  |       |        |          |  |             |       |            |  |         |        |            |  |   |       |  |  |   |       | 
|Operating leases                   |  |       | 19,844 |          |  |             | 2,845 |            |  |         | 8,344  |            |  |   | 5,638 |  |  |   | 3,017 | 
|                                   |  |       |        |          |  |             |       |            |  |         |        |            |  |   |       |  |  |   |       | 
|Total contractual cash obligations |  | $     | 24,175 |          |  | $           | 4,303 |            |  | $       | 10,700 |            |  | $ | 5,864 |  |  | $ | 3,308 | 
|                                   |  |       |        |          |  |             |       |            |  |         |        |            |  |   |       |  |  |   |       | 

15



---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to market risk associated with changes in foreign currency
exchange rates and interest rates. Our foreign currency exchange rate risk
comes from our operations in Europe and South America. The net impact of
foreign exchange activities on earnings was immaterial for the three- and
six-month periods ended December 31, 2002 and 2001, respectively, however, we
will continue to assess the impact, if any, as we continue to implement the
distribution of our products in Europe through our direct infrastructure.
Interest rate exposure is primarily limited to the approximately $31,992,000 of
cash, cash equivalents and short-term investments owned by us. Such
investments are money market debt securities that generate interest income for
us on cash balances. We do not actively manage the risk of interest rate
fluctuations; however, such risk is mitigated by the relatively short-term,
less than twelve months, nature of certain investments. We do not consider the
present rate of inflation to have a significant impact on our business.

Item 4. Controls and Procedures

As of February 3, 2003, the principal executive officer and principal financial
officer evaluated Digenes controls and procedures related to its reporting and
disclosure obligations, as well as its internal controls. These officers have
concluded that Digenes disclosure controls and procedures are sufficient to
provide that (a) material information relating to Digene, including its
consolidated subsidiaries, is made known to these officers by other employees
of Digene and its consolidated subsidiaries, particularly material information
related to the period for which this periodic report is being prepared; and (b)
this information is recorded, processed, summarized, evaluated and reported, as
applicable, within the time periods specified in the rules and forms
promulgated by the Securities and Exchange Commission.

There have been no significant changes in Digenes internal controls or in
other factors that could significantly affect these internal controls
subsequent to the date of the evaluation.

16



---



##### 



PART II. Other Information

Item 1. Legal Proceedings

On November 19, 2001, we filed an action for patent infringement against
Ventana Medical Systems, Inc. The action was filed in the United States
District Court for the District of Delaware. In the action, we allege that
Ventana Medical Systems, Inc. has made, used, sold and/or offered for sale
products embodying our patented inventions thereby infringing our United States
Patent No. 4,849,332 entitled Human Papilloma Virus 35 Nucleic Acid
Hybridization Probes and Methods for Employing the Same and our United States
Patent No. 4,849,331 entitled Human Papilloma Virus 44 Nucleic Acid
Hybridization Probes and Methods for Employing the Same. We are seeking a
permanent injunction and monetary damages for past infringement. On September
25, 2002, Ventana Medical Systems, Inc. publicly announced that it had acquired
Beckman Coulter, Inc.s human papillomavirus business and corresponding assets,
including the assignment of the human papillomavirus intellectual property
portfolio acquired by Beckman Coulter, Inc. from Institut Pasteur through a
1991 sublicense agreement. On October 18, 2002 we filed a motion to amend our
complaint to add Beckman Coulter, Inc. as a co-defendant, as well as additional
claims against Ventana. Ventana did not oppose the amendment and, instead,
filed a Notice of Non-Opposition to our motion. On December 13, 2002, we
formally served our amended complaint on Ventana and Beckman. Neither party
has answered the amended complaint.

On March 15, 2002, we filed an action for declaratory judgment against Enzo
Biochem, Inc. The action was filed in the United States District Court for the
District of Delaware. We filed this action after having received direct
threats from Enzo Biochem of infringement of U.S. Patent No. 6,221,581 entitled
Processes for Detecting Polynucleotides, Determining Genetic Mutations or
Defects in Genetic Material, Separating or Isolating Nucleic Acid of Interest
from Samples, and Useful Compositions of Matter and Multihybrid Complex
Compositions. We are seeking a judgment that the patent is invalid and has
not been infringed by us. On March 20, 2002, in response to our complaint,
Enzo Biochem filed a motion to dismiss our complaint for lack of subject matter
jurisdiction, based on assertions that Enzo Diagnostics, Inc. (a wholly owned
subsidiary of Enzo Biochem), not Enzo Biochem, was the holder of the patent in
question. On the same day, Enzo Diagnostics, Inc. also filed a complaint for
patent infringement against us in the Delaware District Court. Enzo
Diagnostics, Inc. asserts in its complaint that we have infringed U.S. Patent
No. 6,221,581 through the manufacture, sale and offer for sale of our Hybrid
Capture products. The two cases have now been consolidated and discovery has
commenced. We have filed counterclaims against Enzo Biochem for various
business-related tortious conduct. We do not believe we are infringing such
patent and will go forward with the action for declaratory judgment and
continue vigorously defending against Enzos claim of patent infringement.

17



---



##### 



Item 6. Exhibits and Reports on Form 8-K



|(a)  |  | Exhibits:                                                                                                                                                       
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|3.1  |  | Amended and Restated Certificate of Incorporation (Incorporated by
reference to Exhibit 3.1 to Digenes Registration Statement on Form S-1
(File No. 333-2968)).
|    
|3.2  |  | Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to
Digenes Annual Report on Form 10-K for the year ended June 30, 1999).                 
|    
|4.1  |  | Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to
Digenes Registration Statement on Form S-1 (File No. 333-2968)).                 
|    
|10.1 |  | Amendment No. 3 to Letter Agreement, dated December 20, 2002, between
Digene and Roche Molecular Systems, Inc.                                                  
|    
|99.1 |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350, by Chief Executive Officer.                                    
|    
|99.2 |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350, by Chief Financial Officer.                                    
|    
|(b)  |  | Reports on Form 8-K:                                                                                                                                            

Digene filed the following Current Reports on Form 8-K during the quarter ended
December 31, 2002:

|         |  |             |   |                |  |                   |  |                   |  |  |  | 
|-------- |  | ----------- | - | -------------- |  | ----------------- |  | ----------------- |  |  |  | 
|Report   |  | Item(s) No. |   | Date of Report |  | Date Filed       
|         |  |             |   |                |  |                  
|Form 8-K |  |             | 5 |                |  | December 13, 2002 |  | December 13, 2002

18



---



##### 



SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|      |  |                  |                    |                                                                                                                   
|----- |  | ---------------- | ------------------ | ------------------------------------------------------------------------------------------------------------------
|      |  |                  | DIGENE CORPORATION
|      |  |                  |                    |                                                                                                                   
|Date: |  | February 7, 2003 | By:                | /s/ Charles M. Fleischman                                                                                         
|      |  |                  |                   
|      |  |                  |                    | Charles M. Fleischman
President, Chief Operating Officer and
Chief Financial Officer
(Principal Financial Officer)
|      |  |                  |                    |                                                                                                                   
|Date: |  | February 7, 2003 | By:                | /s/ Joseph P. Slattery                                                                                            
|      |  |                  |                   
|      |  |                  |                    | Joseph P. Slattery
Senior Vice President, Finance and Information
Systems
(Principal Accounting Officer)          

CERTIFICATIONS

I, Evan Jones, Chief Executive Officer, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Digene
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;

19



---



##### 





| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and



| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and



| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: February 7, 2003

| |                                   
| | ----------------------------------
| | /s/ Evan Jones                    
| |                                   
| | Evan Jones
Chief Executive Officer

I, Charles M. Fleischman, Chief Financial Officer, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Digene
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

20



---



##### 





| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;



| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and



| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and



| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: February 7, 2003

| |                                              
| | ---------------------------------------------
| | /s/ Charles M. Fleischman                    
| |                                              
| | Charles M. Fleischman
Chief Financial Officer

21



---



##### 



EXHIBIT INDEX

|            |  |                                                                                                                                                                  |  | 
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|Exhibit No. |  | Description                                                                                                                                                     
|            |  |                                                                                                                                                                 
|           
|3.1         |  | Amended and Restated Certificate of Incorporation
(Incorporated by reference to Exhibit 3.1 to Digene's Registration Statement on Form S-1 (File No. 333-2968)).
|           
|3.2         |  | Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to
Digene's Annual Report on Form 10-K for the year ended June 30, 1999).                 
|           
|4.1         |  | Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to Digene's
Registration Statement on Form S-1 (File No. 333-2968)).                 
|           
|10.1        |  | Amendment No. 3 to Letter Agreement, dated December 20, 2002,
between Digene and Roche Molecular Systems, Inc.                                                  
|           
|99.1        |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350, by Chief Executive Officer.                                    
|           
|99.2        |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18
U.S.C. Section 1350, by Chief Financial Officer.                                    

22