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Med BioGene Poised to take Precision Therapeutics to Arbitration over Milestone Payment

NEW YORK (GenomeWeb) – Med BioGene today announced that it is ready to initiate proceedings against its commercial partner Precision Therapeutics to enforce a C$1 million (US$920,000) milestone payment due to Med BioGene.

The Vancouver, British Columbia-based molecular diagnostic firm said that it believes it is owed a first milestone payment of C$500,000 — of which C$300,000 is due now and C$200,000 at the end of the year — related to Precision's commercialization obligations for GeneFx Lung, and after meeting with Precision's management team, Med BioGene "is currently considering its options to enforce [its] contractual rights under the commercialization agreement, including, if necessary, initiating binding arbitration proceedings."

GeneFx Lung is a gene expression test for identifying patients with early stage non-small cell lung cancer who, after surgical removal of their tumors, are at higher or lower risks for mortality. Med BioGene and Precision reached a licensing agreement for the test, previously called LungExpress Dx, in 2011.

Precision received CLIA certification to perform the test out of its Pittsburgh laboratory earlier this year. According to Med BioGene, Precision is currently in discussions with payors, including, Medicare to gain a better understanding of the current reimbursement landscape.

"As such Precision, further advised [Med BioGene] that the timing of the commercial launch of GeneFx Lung will be established by Precision in light of these considerations," Med BioGene said.

The company also announced that it has arranged a C$200,000 private placement, and it intends to use proceeds from the placement to enforce its deal with Precision.

At the same time, the company is trying to ward off efforts by dissident shareholders who seek to replace its entire board. The matter is up to a vote that is scheduled to take place on Sept. 5, and in a letter to shareholders, Med BioGene's Executive Chairman Erinn Broshko warned that if the dissident shareholders are elected to the board and do not raise funds for the company, Med BioGene "will likely not be able to continue for an extended period of time as a going concern."

He further noted that key subscribers to the C$200,000 private placement have made the funding contingent on the re-election of the majority of the current board, including the re-election of Broshko in order to maintain continuity in leadership.

Broshko said that he has been in contact with Iain Weir-Jones, who is spearheading efforts to replace the board in order to find out the dissident shareholders' plans to increase shareholder value. Weir-Jones has not provided any details of a plan or suggestions, Broshko said.