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Transgenomic Files Suit Against Power3 Alleging Fraud, Slander

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Pharmacogenomics firm Transgenomic has filed a lawsuit against Power3 Medical Products alleging that it had wrongly terminated a licensing deal between the firms, as well as accusing Power3 of breach of contract, fraud, and slander, among other claims.

The suit was filed Monday in the US District Court for the District of Nebraska, less than a month after Power3 terminated a year-old agreement that had given Transgenomic exclusive worldwide rights to market and sell Power3's test for neurodegenerative diseases.

The reason for the termination, provided by Power3 in a recent filing with the US Securities and Exchange Commission, was Transgenomic's alleged failure to complete the first commercial sale of a licensed product within 12 months of the date the Agreement was executed. In addition, Power3 claimed that Transgenomic committed material breaches of the agreement, including a "breach of the confidentiality provisions."

Transgenomic in its suit has denied these allegations and has asked the court to declare that its license remains in full force and effect.

However, the firm also alleged that Power3 has damaged its reputation and share price through its actions and its claims in the SEC filing.

Among the allegations made by Transgenomic in the suit are that Power3 engaged in fraud by making "false representations regarding the performance and results of its neurodegenerative tests to Transgenomic to induce Transgenomic to enter into the [a]greement." Specifically, Transgenomic claims that Power3 provided the firm with resubstitution results, which showed better performance of the test than cross-validation results, which showed much lower specificity and sensitivity in testing for Alzheimer's disease and Parkinson's disease.

"Transgenomic relied on the fraudulent Power3 data to enter into the [a]greement and expended more than $520,000 in payments to Power3," the lawsuit claimed.

Transgenomic also said that Power3's assertion that it had breached the contract by not making a commercial sale within 12 months after the deal was signed is also false. The firm provided the court with a receipt, which it said shows that it made a sale on Jan. 21, 2010. It further claimed that the sale was delayed due to Power3's failure to perform its obligations under the agreement.

In addition, Transgenomic said that Power3 had told a third party that Transgenomic "was not conducting scientifically sound research, it did not know what it was doing, and other derogatory statements and falsehoods." Transgenomic said this "was done intentionally and maliciously to harm Transgenomic's reputation and goodwill."

Transgenomic has asked the court to declare that Power3 wrongfully terminated the agreement between the firms and that the license remains in full effect; to preliminarily and permanently enjoin Power3 from "continuing to defame Transgenomic;" to order Power3 to account for revenues and profits derived from Power3's alleged breach of the pact, including granting third-party licenses in violation of the agreement; and for damages associated with the claims made in the suit.

A call from GenomeWeb Daily News sister publication ProteoMonitor to Power3 seeking comment had not been returned by the time this article was published.

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