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LabCorp Counters Correlogic's Motion in Bankruptcy Case to Reject OvaCheck Licensing Agreements

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This story originally ran on Aug. 4.

Laboratory Corporation of America this week filed an objection to a motion filed by Correlogic Systems as part of its recent Chapter 11 bankruptcy filing that would allow it to reject licensing agreements between the two companies for Correlogic's protein biomarker-based ovarian cancer test OvaCheck.

In its objection, LabCorp said Correlogic's "naked assertions that the license agreement is an impediment to financing and reorganization do not suffice," and that it "intends to retain its rights under the licensed technology, including its exclusivity provisions."

The objection also argued that the intellectual property included in the agreement is covered under section 365(n) of the Bankruptcy Code and that therefore LabCorp "will retain significant rights, even if the license agreement is rejected."

Correlogic filed for Chapter 11 protection last month in US Bankruptcy Court in the District of Maryland. As part of the filing, it asked the court to allow it to reject OvaCheck licensing agreements with Quest Diagnostics and LabCorp.

At the time, Correlogic CEO Peter Levine told ProteoMonitor sister publication GenomeWeb Daily News that because OvaCheck had moved from a mass spectrometry-based platform to an immunoassay-based platform since the agreements had been signed, there was ambiguity as to whether or not the agreements still covered the test (GWDN 07/23/2010).

This ambiguity, he said, "actually made it more difficult for us to obtain additional funding."

He declined to say whether Correlogic had been in negotiations with either Quest or LabCorp to terminate the agreements independent of the court motion, and neither Quest nor LabCorp responded to requests for comment.

In its Chapter 11 filing, Correlogic said that it had assets and liabilities each of between $1 million and $10 million, and between one and 49 creditors. Among the creditors holding the 20 largest unsecured claims are Thermo Fisher Scientific, owed $15,089; Ahn-Good Pharmaceuticals, which is owed about $22,890; and several executives and employees of Correlogic, including Levine, who is owed $414,663 in deferred salary, the largest unsecured claim amount.

Originally designed as a CLIA-based diagnostic, OvaCheck has existed in a state of regulatory limbo since 2004 when the US Food and Drug Administration informed Correlogic that it might have purview over the test. In December 2008, the company filed a 510(k) application with the agency, but was told by FDA that the patient population used in the clinical trial for the test was not satisfactory. Currently the company is undertaking the "second arm" of the trial, which involves patient populations being treated by non-specialists.

It obtained CE marking for the test in June (PM 06/11/2010).

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