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Sequenom Says GAG Bioscience Has Been Illegally Using its IP for Scrapie Services


GAG Bioscience, of Bremen, Germany, has plans to import its scrapie-susceptibility testing business to Canada, and introduce its floundering beef-traceability unit to North American and European markets. But the company may first need to obtain certain intellectual property rights owned by Sequenom, SNPtech Pharmacogenomics Reporter has learned.

In fact, GAG will also have to obtain licenses to IP owned by Sequenom if it wants to continue providing scrapie-susceptibility testing in the five European countries in which it currently provides some some of its services, according to Sequenom.

Toni Schuh, president and CEO of Sequenom, stressed that he “does not intend to engage in patent-infringement lawsuits” with companies like GAG that allegedly infringe IP tied to Sequenom’s mass spec-based MassArray genotyping technology. Rather, Schuh said, Sequenom plans over the next few weeks to begin discussing legal ways through which GAG can continue to use the IP.

“We can claim today that there’s no meaningful way to do DNA analysis with a MALDI-TOF mass spectrometer without being knee-deep in our IP,” Schuh told SNPtech Pharmacogenomics Reporter this week. “To the extent that GAG uses MALDI-TOF mass spectrometry for genetic testing, we would pursue some mutually agreeable arrangement.”

Today, GAG’s four business units — scrapie-susceptibility testing, food traceability services, human pharmacogenetics research, and plant breeding — revolve around the MALDI-TOF mass spectrometer made by Bremen neighbor Bruker Daltonics, said Georg Melmer, vice president of business development at GAG. But according to Schuh, the rights that GAG has had to perform genotyping work using mass spectrometry had expired at the end of 2003 in Europe, when patent officials on the Continent awarded Sequenom with IP to cover mass spec-based genotyping. This patent covers 14 European countries, including Germany.

“So for the longest time there was indeed more leeway to use MassArray-based technologies in Europe than there was in the United States,” where these patents were issued earlier, said Schuh. GAG has not sought licensing approval to these patents in Europe or in the United States, according to Pete DeSpain, a Sequenom spokesman. “No, [GAG] has no license” to our MassArray technology,” DeSpain said. “No, they have never applied for any IP technology” tied to the platform.

“If they wish to continue using MALDI-TOF mass spectrometry for DNA analysis, then they’ll have to either license our technology or change the way in which they do [DNA analysis],” DeSpain added. “There’s simply no way around it.”

Jorn Mosner, CEO of GAG, said this week he is not aware of any IP that his company is infringing, and said GAG will continue performing its services using mass spec-based genotyping. “We use MALDI-TOF mass spectrometry for genotyping, that is true,” he said. “But if we have trouble with existing patents owned by Sequenom, I’m not sure about that. I think that has to be clarified.”

Asked whether Sequenom’s technology is the only one of its kind that enables mass spectrometry to analyze DNA, Mosner replied: “No.” He declined to elaborate.

“I’ll wait until they come to me,” he added.

Schuh maintained that GAG infringes Sequenom’s IP when it uses the Bruker platform to genotype samples for its customers. “Everybody can go to Bruker and say, ‘How about you sell me a MALDI-TOF mass spectrometer,’ and apply our process,” Schuh said. “There is a little fuzziness in the market today. People think that the trick of MassArray is the MALDI-TOF, but how you get that detection system to work with DNA ... [is] our intellectual property.”

Schuh said Sequenom currently owns around 60 patents tied to the MassArray platform.

“I would concede that these relatively small organizations that probably don’t have big IP departments … didn’t notice that,” he said. “We will inform these entities and others that use mass spec-based genotyping technology of the existence of these patents, and we will sit down with them and come to reasonable arrangements.”

Schuh added: “We have no motivation — and would derive no benefit — from taking anybody out of business. We want to work with these people.”

He and Mosner confirmed this week that Sequenom and GAG are currently not participating in any licensing or R&D collaboration.

Scraping By?

To be sure, Mosner conceded that the company’s traceability services haven’t caught on outside of Germany’s farming community. Company officials maintain, however, that the strategy was sound when it was created, and said the European Union’s notoriously stringent food regulations would sustain the business.

However, the company last week told SNPtech Pharmacogenomics Reporter that it plans to try its luck in the Canadian scrapie-susceptibility market, and on meat traceability in North America. If it does, it will expand the market in which it uses the mass spec-based genotyping platform that Schuh said belongs to Sequenom.

On the nascent meat-traceability front, GAG wants to use as a launching pad the single BSE cases that surfaced in Canada in May and in the United States last month — the latter which Sequenom’s MassArray platform had helped to confirm — to approach Agriculture and Agrifoods Canada and the US Department of Agriculture about licensing its traceability platform, Mosner said.

He said he thinks the business will thrive in North America despite its failures in Europe; the North American beef industry mainly exports its beef to Asian markets, “which demand traceability and better documentation for where the meat” originated, Mosner said [see 1/8/04 SNPtech Pharmacogenomics Reporter]. He said the situation in Europe is different.

On the scrapie-testing front, GAG to date tied up a “huge” agreement with the German government, and has penned similar deals with Austria, Greece, Italy, Israel, and Sweden. The company is currently vying to sell its services in Spain and France, and in the “near future” hopes to approach Bulgaria, Romania, and Poland.

According to Mosner, governments using GAG’s sheep-genotyping services can expect to shell out €10 per animal, compared with €25 per animal for Orchid Biosciences. Both companies share a scrapie-susceptibility market estimated to be worth $2 million. These days, Canada “wants to build a scrapie genotyping service, and they asked [GAG] if we want to provide the technology,” Mosner said.

Though it is difficult to say how much money the EU or Canadian government intends to spend to counter scrapie, Mosner said his company’s collaboration with the German government is worth €500,000 in annual revenue, and the deal in Canada, if it gets approved, would be worth between €500,000 and €1 million. (Coincidentally, Sequenom has been licensing its platform to British analytical lab-services provider LGC since 2002.)

GAG has also been applying its genotyping services into molecular diagnostics, and the company last year signed a fee-for-service contract with Bayer to identify molecular diagnostics markers. It is GAG’s only human pharmacogenetics collaboration to date, said Mosner, who added that the company is negotiating with an undisclosed number of biotechnology and pharmaceutical firms for similar SNP-discovery and -analysis deals.

— KL


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