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Healthlinx Inks Deal to Sell OvPlex Dx to San Diego-Based Startup Mane Cancer Diagnostics

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Australian diagnostics firm Healthlinx has reached an agreement to sell the majority of its intellectual property along with existing commercial and distribution agreements to newly formed San Diego-based diagnostics company Mane Cancer Diagnostics.

The deal, which is expected to close within the next several weeks contingent on the approval of both companies' shareholders, includes IP and commercial agreements relating to Healthlinx's OvPlex ovarian cancer diagnostic, a potential competitor to protein biomarker-based ovarian cancer tests currently on the market in the US, including Vermillion's OVA1 and Fujirebio's ROMA test.

Under the terms of the agreement, Healthlinx will receive a cash payment of $250,000 and Mane common stock representing 30 percent of the outstanding common stock on the closing of Mane's planned initial public offering. Mane is to raise at least $5.5 million in capital and achieve before Dec. 24 of this year either a listing on the Nasdaq or the sale of 100 percent of the raised capital in exchange for ordinary common stock in a Nasdaq-listed "blank check" company.

In addition to Healthlinx OvPlex assets, Mane will also obtain all rights related to the company's AGR2 monoclonal antibody, CR014 vascular permeability peptide, and LAP001 adipogenesis inhibitor programs. Healthlinx will retain rights to its ClearIT IgY protein depletion technology. However, if in the future it wishes to sell, license, or assign rights to this technology to a third party, Mane will have first right of refusal.

In a statement issued this week to shareholders, Healthlinx said that the deal with Mane would "raise the profile of [Healthlinx's assets] in the [US] and provide direct exposure to funding opportunities in the [US] financial markets." The company added that it believes that "vesting ownership of the [assets] in a [US]-domiciled company that has an experienced management team will make it easier to achieve [US Food & Drug Administration] regulatory approval."

Healthlinx has long identified access to the US market as key to OvPlex's and the company's success. In May 2011, 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, and in December 2011 it signed a convertible note financing deal with California-based La Jolla Cove Investors for up to $9 million over four years in part to fund its efforts to expand into the US market (PM 12/16/2011).

The company also last year appeared to contemplate moving into the US market via purchase of the ovarian cancer assets of now-defunct protein diagnostics firm Correlogic. Specifically, in a September 2011 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, but based on the description, it appeared that the firm being targeted was likely Correlogic (PM 10/14/2011).

In November 2011, Empire Equity, an investment firm with ties to Healthlinx, submitted a letter of intent announcing its plans to purchase substantially all of Correlogic’s assets at auction. However, it failed to tender a deposit prior to the date required by the court administering the auction, and Vermillion ultimately purchased Correlogic's assets for $435,000 in cash (PM 12/2/2011).

Vermillion's purchase of Correlogic's assets could have important implications for Mane's efforts to commercialize OvPlex in the US. A June 2011 valuation of Healthlinx by Australian consulting firm Acuity Technology Management noted that Correlogic's OvaCheck panel – now owned by Vermillion – 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.

Vermillion CEO Gail Page alluded to this potential IP issue when she discussed Vermillion's purchase of the Correlogic assets, noting that "there's always a lot of white noise out there by companies claiming to be in this space."

"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," she added.

IP questions aside, both Vermillion and Healthlinx have had difficulty driving adoption of their tests in the marketplace.

Since launching OVA1 in March 2010 following restructuring in Chapter 11 bankruptcy, Vermillion's sales of the test have fallen well short of initial expectations as the company has struggled with issues including reimbursement and doctor reorders.

In May, the company announced that CEO Gail Page would be stepping down this fall (PM 5/18/2012), and in Vermillion's recent Form 10-Q for the second quarter of this year, the company noted that it would need to raise additional capital in order to continue its operations "as currently planned through 2013 and beyond," adding that "there is substantial doubt about the company’s ability to continue as a going concern" (PM 8/17/2012).

Healthlinx, likewise, has struggled to grow sales of OvPlex. The company relaunched Australian sales of the test in June 2010, after pausing them in September 2009 when the test's distributor, ARL Pathology, was acquired by Healthscope. Also in 2010 it started sales in of the diagnostic in the UK and Singapore and inked OvPlex distribution deals in Israel and South Korea (PM 12/3/2010). It has since signed distribution deals for the test in India, Indonesia, Thailand, and Vietnam.

Sales of the test, however, remain sluggish. According to the company's 2011 annual report, Healthlinx reported A$14,170 ($14,593) in product sales and royalty revenue in 2011, after logging $12,757 in such revenue in 2010.

Assuming Mane is able to guide OvPlex through the FDA approval process, the test will face competition from OVA1 and Fujirebio's ROMA ovarian cancer test, which received FDA approval last September (PM 9/9/2011).

According to Healthlinx's statement regarding the deal, Mane is "a recently formed privately held diagnostics company ... which has been incorporated to focus on developing and marketing diagnostic products for unmet oncology indications that affect men and women."

The company is composed of several veterans of the biotech industry, most of them former employees of San Diego-based drugmaker Adventrx Pharmaceuticals.

The firm is headed by Evan Levine, who serves as president, CEO, and a company director. Levine is also a managing partner of investment firm Mark Capital and the former CEO of Adventrx.

Joining Levine as director and chief financial officer is Ian Wisenberg, a founder and managing partner of BioGlobal Consulting Group and BioGlobal Ventures as well as co-founder and managing director of ChinaBio Capital Partners.

The company has also hired, as consultants, Joan Robbins as chief scientific officer and Mark Erwin as chief business officer.

Robbins is currently the senior director of cancer biology at Tocohen and was previously senior vice president and chief scientific officer at Adventrx as well as a researcher at the National Cancer Institute, the Garvin Institute for Medical Research, and the University of California, San Diego. Erwin is senior director of reimbursement and government affairs at Prometheus Laboratories and was previously senior vice president of commercialization at Adventrx.

Contacted by ProteoMonitor this week, Levine declined to comment on the agreement or the company, noting that he preferred not to speak publicly until the deal had closed.

Healthlinx did not respond to a request for comment.

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