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Natera Files Suit Against Bio-Reference Laboratories for Breach of Contract

NEW YORK (GenomeWeb) – Natera has filed a suit against Bio-Reference Laboratories claiming that the firm breached a contract with Natera when it launched and promoted a noninvasive prenatal test based on Illumina's technology, according to a research note issued this morning by investment bank Piper Jaffray.

Bio-Reference has been offering Natera's Panorama noninvasive prenatal screening test since 2013, but last month it launched its own NIPS, ClariTest, which is based on technology it licensed from Illumina.

Natera alleges in its suit, which was filed last month with the US District Court for the Southern District of New York, that Bio-Reference's promotional materials for ClariTest violate the licensing agreement between Bio-Reference and Natera. It further alleged that the marketing materials for ClariTest discuss ClariTest more prominently than Panorama, "make comparisons that are not supported by peer-reviewed publications," and "disparage" Panorama.

In 2015, Natera and Bio-Reference updated their licensing agreement. According to the suit, Natera granted Bio-Reference a license to develop its own NIPS, and although it did not prohibit Bio-Reference from distributing tests developed by third parties, it placed restrictions on marketing. Specifically, Natera said that Bio-Reference was bound to promote Panorama as prominently as third-party tests and must base any claims or comparisons on data from peer-reviewed publications.

In addition, Natera said that it shared confidential information with Bio-Reference that Bio-Reference subsequently used to market ClariTest, including strategies for selling, costs of goods sold, and proposals to improve reimbursement. Natera said it also shared confidential information related to its cancer diagnostics product pipeline based on assertions from Bio-Reference that it was interested in partnering with Natera on those products.

Natera requested a preliminary injunction and a temporary restraining order against Bio-Reference and ClariTest. Although US District Judge Ronnie Andrews denied the temporary restraining order, writing that Natera did not demonstrate that it would suffer "irreparable harm through the loss of trade secrets," the motion for a preliminary injunction will be heard.

In the note to investors, Piper Jaffray analyst William Quirk said he believes Bio-Reference's sales of the Panorama test accounts for around 7 percent of Natera's total revenue. He added that with Bio-Reference selling both tests, "we do not anticipate BRLI's revenue going to $0, but indirect US growth could be slower going forward."