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Stratagene Questions Logic of Jury Award, Says Injunction Will Not Affect Its Dx Plans

Despite an injunction issued last week that prevents Stratagene from selling its FullVelocity QPCR and QRT-PCR products, company officials intend to press ahead with their plans to enter the molecular diagnostics market while appealing an earlier judgment against the company.

The injunction is the latest setback for Stratagene, which a month ago was ordered by a US District Court jury in Wisconsin to pay Third Wave Technologies $5.29 million in damages for patent infringement (see BioCommerce Week 9/8/2005). Though Stratagene is appealing the verdict and the damage award, if the jury's decision stands it would wipe out virtually all of Stratagene's cash holdings, which stood at $5.7 million as of the end of its second quarter on June 30.

"We have the money to pay it," said Joe Sorge, chairman and CEO of Stratagene, noting that the firm would not have to raise additional funds to satisfy the judgment. He also said the jury's award was "beyond our comprehension" and "not well-connected to logic."

Sorge said the verdict and injunction will have no impact on the firm's plans to play in the molecular diagnostics market — a market valued at anywhere from $1.2 billion to $2.5 billion annually. He told attendees of the UBS Global Life Sciences conference last week in New York that the firm plans to capitalize on its non-infringing FullVelocity technology to develop molecular diagnostic products.

The damages are "beyond our comprehension" and are "not well-connected to logic."

Stratagene holds five US patents covering the FullVelocity technology, with additional patents pending. Third Wave's Invader technology, which is similar to FullVelocity and is the subject of Third Wave's suit and a countersuit filed recently by Stratagene, is covered by more than 30 US patents and more than 60 patents pending.

Sorge maintains that FullVelocity does not infringe Third Wave's patents. He told BioCommerce Week in July, "Stratagene does not include overlapping DNA molecules in its kits. Stratagene's FullVelocity technology benefits from the sensitivity advantages of PCR amplification, something not found in Third Wave's Invader methods."

After the jury's verdict was handed down, Stratagene immediately served Third Wave with a countersuit it had filed in May with the US District Court for the District of Delaware claiming that some of Third Wave's Invader products infringe its 6,528,254 and 5,548,250 patents. Stratagene is seeking monetary damages as well as a permanent injunction against further infringement by Third Wave.

Sorge's comments at the UBS conference were the company's first in public about the jury's decision and damages award — beyond saying in a press release that Stratagene would appeal, and the infringing products accounted for less than $400,000 in revenue since being introduced in early 2004.

Sorge called the award "disproportionate" to the alleged damage done to Third Wave. He explained that the jury was instructed to determine a damage amount based on a theoretical negotiation between the firms that would yield an 18-month non-exclusive license to the infringed patents. It is "beyond our comprehension" how the jury came up with the $5.29 million in damages, he said.

He questioned whether the judge and jury based in Madison, Wis. — the home of Third Wave — could have influenced the outcome. Sorge said the firm would soon file an appeal in the Court of Appeals for the Federal Circuit in Washington, DC, seeking to have the injunction lifted and the damages reduced or eliminated.

Pressing Forward in Molecular Dx

Despite the legal setbacks, Stratagene is moving forward with plans to hit the molecular diagnostics market later this year. The company has been in negotiations for several months with an unnamed partner to further develop the firm's MX3005 QPCR instrument for molecular diagnostic applications (see BioCommerce Week 7/21/2005).

The partner was initially going to develop a new and bigger version of the MX3005 instrument, but has since opted to use Stratagene's off-the-shelf instruments. Sorge said last week that the alliance is still expected to be signed before the end of this year, and that the partner is in the final stages of validating the chemistry.

Stratagene believes its opportunity to compete in the molecular diagnostics arena was enhanced by the March expiration of certain PCR patents held by rival Applied Biosystems and Roche. The company is trying to make its case to customers that its FullVelocity QPCR reagents are faster, more sensitive, and more cost effective than the industry standard TaqMan.

Sorge also revealed that Stratagene is talking with "four or five" large diagnostic companies about using FullVelocity-based technology in their molecular diagnostic product lines. In addition, the firm is discussing with undisclosed reference labs the possibility of using FullVelocity reagents as molecular diagnostics.

Stratagene has sold 1,200 of its MX3000 and MX3005 QPCR instruments — at a cost of roughly $25,000-$30,000 each — since they were introduced over the past two years, Sorge noted during his presentation at UBS.

Among other future plans for the company, Sorge said that Stratagene would continue to seek acquisitions of intellectual property in the areas of cancer diagnostics, biomarkers, and pharmacogenomics. He declined to be more specific.

The firm also intends to introduce a microRNA reagent kit in the fourth quarter of the year, taking aim at an emerging, niche research market with a handful of competitors but no dominant player yet. Among those with which the firm will compete are Ambion, Qiagen, ABI, and Third Wave.

— Edward Winnick ([email protected])

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