This story and headline have been updated from a version posted Nov. 30 to note court approval of the sale of Correlogic’s assets to Vermillion.
Vermillion’s purchase of the assets of bankrupt diagnostics firm Correlogic for $435,000 in cash was approved today after a planned auction of those assets fell through.
London-based private merchant bank Empire Equity Limited, which had previously submitted a letter of intent announcing plans to purchase Correlogic, failed to tender a required deposit prior to the auction, leaving Vermillion as the sole bidder.
Vermillion originally announced its plans to buy Correlogic’s assets during a Nov. 9 investor call (PM 11/11/2011). However, on Nov. 23, law firm Miles & Stockbridge – one of Correlogic’s creditors – filed an objection to the pending sale, claiming that it failed “to provide for bidding procedures or an auction of the assets, to maximize the value of the assets for the benefit of creditors.”
The objection also noted that M&S represented a bidder – although it did not at that time specifically name Empire Equity – for Correlogic’s assets, and that that bidder had submitted a letter of intent to the company on Nov. 23 announcing its plans to purchase substantially all of Correlogic’s assets for a higher price than that offered by Vermillion.
An order issued on Nov. 30 by the US Bankruptcy Court in the District of Maryland set a telephone auction of Correlogic’s assets for today. Any party wishing to participate, including Empire Equity, was required by the order to tender a deposit of $50,000 by 5 p.m. Nov. 30. If no party put down a deposit by that time, sale of Correlogic’s assets to Vermillion would be automatically approved.
Empire Equity is not a protein biomarker firm itself, but it has connections to Australian diagnostics firm Healthlinx, owner of the ovarian cancer diagnostic OvPlex. According to documents filed with the Australian Stock Exchange, Healthlinx has hired the company in the past for capital raising activities.
In a September shareholder update, Healthlinx said that as part of its US strategy it would seek "to acquire distressed synergistic assets from a company in Chapter 11." The update did not name the company in question, and Healthlinx managing director Nick Gatsios declined to comment, but, based on the description provided in the update, it appeared that the firm being targeted was likely Correlogic (PM 10/14/2011).
Acquisition of Correlogic’s assets could have proven important to Healthlinx’s ambition to bring OvPlex to the US market. A June valuation of Healthlinx by Australian consulting firm Acuity Technology Management noted that Correlogic's OvaCheck panel includes three of the five proteins comprising the OvPlex panel. Given that Correlogic's OvaCheck patent was filed prior to Healthlinx's OvPlex patent, "there remains a risk that not all claims [related to OvPlex] will be granted in all jurisdictions," the Acuity report said. Purchase of Correlogic’s assets would have eliminated this potential issue.
Comments by Vermillion CEO Gail Page upon the initial announcement of the purchase suggest the company had IP concerns in mind, as well.
"There's always a lot of white noise out there by companies claiming to be in this space," Page said. "By taking this IP and software, we can harvest it, and we can also sort of keep other people out of that space, if you will."
The purchase, she said, would give the company "access to prospectively collected samples, intellectual property, and software, all of which could accelerate our ovarian program," including its second-generation ovarian cancer diagnostic OVA2. The deal would also potentially provide "further IP protection," she noted.
Correlogic filed for Chapter 11 bankruptcy on July 16, 2010, and this March embarked on an effort to auction its assets. At that time, the minimum bid for the company's assets was set at $1.35 million or at $850,000 for its ovarian cancer assets alone. However, the highest and best offer the company obtained was a $250,000 bid for its ovarian assets.
On June 23, Correlogic canceled an auction scheduled for the following day, choosing to postpone sale of its assets until it was able to settle an ongoing dispute with Quest and LabCorp regarding rights to OvaCheck (PM 7/8/2011). In early November, the parties reached an agreement ending the dispute. Under it, Correlogic will provide a non-exclusive license to Quest and LabCorp to all IP rights to the OvaCheck test as it existed prior to the company's bankruptcy filing in exchange for a cash payment of $75,000.
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