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Vermillion, Quest End Old Licensing Deal; Establish New OVA1 Commercial Agreement

NEW YORK(GenomeWeb) – Vermillion said after the close of the market Tuesday that it has reached a new commercialization and services agreement with Quest Diagnostics.

Under the agreement, Vermillion will pay Quest an undisclosed sum and fees for logistical support services as Vermillion transitions its OVA1 ovarian cancer testing business from Quest to its own subsidiary, Aspira Labs.

Additionally, the two parties have reached a settlement of all claims related to their prior alliance. Under the settlement, Vermillion paid Quest $1.07 million to reconcile disputed charges related to a credit agreement between the two companies.

Additionally, Quest agreed to credit Vermillion $100,000 against any future OVA1 royalty payments due to Quest under the parties' new commercialization agreement. The agreement calls for Vermillion to pay Quest a royalty of 2 percent on net sales and an annual minimum royalty of $25,000, payable beginning March 11, 2016.

The settlement marks the culmination of efforts begun by Vermillion two years ago to end its licensing agreement with Quest.

Under that agreement, which was signed in 2005, Quest held exclusive commercialization rights to OVA1 in the clinical reference lab marketplace in theUS,India,Mexico, and theUK, as well as non-exclusive rights to commercialize OVA1 globally outside these countries.

As OVA1 struggled in recent years to find footing in the marketplace, though, Vermillion expressed dissatisfaction with the Quest agreement, and, in August 2013, the company sent Quest a notice of termination of their licensing deal, alleging "material violations, breaches, and failures to perform" by Quest under the agreement.

Vermillion said the decision would allow it to take exercise greater control over the OVA1 sales process, with then CEO Thomas McClain telling GenomeWeb in an April 2014 interview that "when [OVA1] is commercialized by a large lab like Quest that is commercializing thousands of tests, when [sales reps] have time with a physician, they are not going to be able to devote a significant amount of time to OVA1 specifically." 

Vermillion also in 2014 launched its new clinical reference laboratory business, Aspira Labs, which provided it with an in-house facility for running OVA1, allowing it to end its reliance on Quest.

Quest, however, denied the effectiveness of the licensing agreement termination, and, until yesterday, it remained unclear how the firms' would move forward with regard to OVA1 testing.

Under the companies' new testing and services agreement, Quest will transition OVA1 testing to Aspira  in the 39 states where Aspira currently operates and will transition testing to Aspira in the remaining 11 states as Aspira obtains the necessary licenses.

Quest will also continue to provide specimen collection and logistics services for OVA1 and, possibly, future Vermillion tests.

Additional terms of the deal stipulate that Quest may offer tests competing with OVA1, but with certain restrictions on how these tests may be marketed. Vermillion, meanwhile, cannot sell OVA1 materials or authorize performance of OVA1 testing by any entity whose gross annual revenue exceeds $2 billion in the U.S., which precludes, for instance, Quest competitor Laboratory Corporation of America, from offering the test.