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Is Healthlinx Eyeing Purchase of Correlogic's Assets as Part of Move into US Cancer Dx Market?


This story originally ran on Oct. 12.

By Adam Bonislawski

Australian diagnostics firm Healthlinx noted in a September shareholder update that it would seek "to acquire distressed synergistic assets from a company in Chapter 11" as part of its US strategy.

The update did not name the company in question, and Healthlinx managing director Nick Gatsios declined to comment when reached by ProteoMonitor, but based on the description provided and Healthlinx's focus on its ovarian cancer test OvPlex, it seems likely a reference to Germantown, Md.-based diagnostics firm Correlogic, developer of the OvaCheck ovarian cancer diagnostic. Correlogic filed for Chapter 11 bankruptcy on July 16, 2010, and this summer announced plans to auction its assets (PM 6/17/2011).

In the update, Healthlinx described the assets it is pursuing as including patents; blood samples across ovarian, breast, prostate, and colorectal cancer; US Food & Drug Administration submissions; and clinical collaborations. Correlogic's assets include all of these.

Purchase of Correlogic's assets could address intellectual property concerns regarding similarities between OvPlex and OvaCheck. A valuation of Healthlinx done in June 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.

Minimum bids for the auction of Correlogic's assets have been set at $850,000 for the company's ovarian cancer portfolio – which includes OvaCheck – and $1.35 million for its ovarian and non-ovarian assets combined. Sale of these assets has been delayed, however, by an ongoing dispute between Correlogic and Quest Diagnostics and Laboratory Corporation of America regarding rights to OvaCheck.

Upon filing for bankruptcy, Correlogic sought to reject OvaCheck licensing agreements it had signed with Quest and LabCorp, claiming that uncertainty over the validity of the agreements was an impediment to obtaining new investment and was hampering its reorganization efforts (GWDN 07/23/2010).

In particular, Correlogic said this uncertainty stemmed from the fact that the licensing agreements were signed in 2002 when OvaCheck was still a mass spectrometry-based test. Since then it had migrated to an immunoassay version, which, the company claimed, wasn't covered by the deals with the reference labs.

In October, the US Bankruptcy Court in the District of Maryland ruled in Correlogic's favor, allowing it to reject the licensing agreements, over Quest and LabCorp's objections (PM 10/08/2011).

This, however, didn't fully settle the dispute as both companies maintained that even were the licenses rejected they still held rights to OvaCheck under section 365(n) of the bankruptcy code, which provides certain rights to intellectual property licensees in order to protect businesses from disruptions arising when a licensor seeks to reject a license agreement as part of a bankruptcy proceeding.

This portion of the dispute has remained an open question, with Correlogic suing Quest and LabCorp in June for declaratory judgment, requesting that the court rule that the company's agreements with the two reference labs encompass only the original mass spec-based tests and not the multiplex immunoassay known as OvaCheck.

A trial has been set for Dec. 6 to resolve the dispute, after which auction of the company's assets will proceed, Correlogic CEO Peter Levine told ProteoMonitor.

A Global Market

The US is by far the largest potential market for Healthlinx's OvPlex, representing a roughly $330 million market according to numbers provided by the company in the September update. In May, the company hired Aurora, Colo.-based CPC Clinical Research to help it prepare a pre-IDE submission to FDA and coordinate meetings between it and the agency. According to the Sept. 27 shareholder update, a pre-IDE meeting with FDA is expected before the end of the year.

Last month, the US ovarian cancer test market saw a new entrant as FDA granted 510(k) clearance for Fujirebio's ROMA product – a diagnostic using a combination of blood tests for the proteins HE4 and CA125 with the Risk of Ovarian Malignancy Algorithm (PM 9/9/2011). The test could prove a less expensive, more accurate alternative to Vermillion's OVA1 ovarian cancer diagnostic and would be a competitor to a US version of OvPlex, as well.

OvPlex launched commercially in Australia in October 2008, expanding to the UK and Singapore in 2010. This week Healthlinx began selling the test in Malaysia through an arrangement with its distribution partner INEX.

Additionally, Healthlinx has distribution deals for the test in Israel, South Korea, India, Indonesia, Thailand, and Vietnam. It is currently in the middle of a 220-patient study being conducted by Byoung-Gie Kim of South Korea's Samsung Medical Center and Sungkyunkwan University School of Medicine to obtain data for submission to the South Korean Food and Drug Administration. It also signed an agreement last month with China's CytogenDx to begin a 350-patient study conducted by Fei Xu of Wuxi Maternal and Children’s Hospital as part of the SFDA approval process.

Correlogic has also been active in Asian markets. However, in February it sold certain patent rights related to OvaCheck in South Korea, China, Japan, Malaysia, and Singapore to Korean drugmaker Ahn-Gook Pharmaceutical as part of a settlement resolving a dispute surrounding a loan agreement between the two companies (PM 2/25/2011).

In addition to its international expansion efforts, Healthlinx is preparing to submit OvPlex for registration by Australia's Therapeutic Goods Administration. Under new regulations introduced on July 1, 2010, in vitro diagnostic devices are required to undergo premarket assessment and approval by the TGA.

The company also continues work on a multi-center, 1,150-sample trial of OvPlex. This week it said it had completed part two of the study, bringing the total number of samples analyzed to 742. These analyses found that OvPlex was able to identify ovarian cancers from a group of 222 women with malignant epithelial ovarian cancer; 53 with confirmed borderline ovarian tumors; 223 with benign gynecological conditions; and 244 apparently healthy controls with AUC of 88.4.

Have topics you'd like to see covered in ProteoMonitor? Contact the editor at abonislawski [at] genomeweb [.] com.