The US Bankruptcy Court for the District of Maryland last week issued bidding procedures for the sale of the assets of diagnostics firm Correlogic Systems.
Auction of the company's assets is scheduled for June 19, with minimum bids set at $850,000 for its ovarian assets – which include its protein-biomarker based ovarian cancer diagnostic OvaCheck – and $1.35 million for its ovarian and non-ovarian assets combined.
Such minimum price targets are typically established by so-called stalking-horse bids — favorable bids solicited by the bankrupt company — but Correlogic has no formal stalking-horse bidder for the assets, CEO Peter Levine told ProteoMonitor. Instead the minimums are based on a valuation placed on the assets by a company that had privately expressed an interest in the firm, he said.
While a date has been set for the sale of Correlogic's assets, the extent of Quest Diagnostics' and Laboratory Corporation of America's rights to the company's OvaCheck test remains in dispute.
Both companies have maintained that they have rights to Correlogic's technology under section 365(n) of the Bankruptcy Code, which provides certain protections to intellectual property licensees from disruptions in business arising when a licensor seeks to reject a license agreement as part of a bankruptcy petition.
The two firms signed licensing agreements with Correlogic in 2002 for rights to OvaCheck. When Correlogic filed for bankruptcy last summer, it sought to reject these licenses, claiming that uncertainty over the validity of the agreements was an impediment to obtaining new investment and was hampering its reorganization efforts.
In October, the US Bankruptcy Court in the District of Maryland ruled in Correlogic's favor, allowing it to reject the licenses (PM 10/08/2010).
The question remained, however, of Quest's and LabCorp's rights under section 365(n). Since the 2002 licensing agreements, Correlogic has moved the OvaCheck test from a mass spectrometry-based platform to a new immunoassay version. At the time of the October ruling, Levine told ProteoMonitor that the company believed the new platform wasn't "really covered at all under the original agreements."
Section 365(n) would not entitle either company to intellectual property developed by Correlogic since the company's bankruptcy filing on July 16, 2010.
A hearing to determine Quest's and LabCorp's rights under 365(n) has not yet been scheduled, meaning that any buyer of Correlogic's assets at the June 19 auction would be making the purchase without knowing the extent of those companies' rights to OvaCheck.
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