Clinical OMICS

MAR-APR 2019

Healthcare magazine for research scientists, labs, pathologists, hospitals, cancer centers, physicians and biopharma companies providing news articles, expert interviews and videos about molecular diagnostics in precision medicine

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Page 9 of 51

8 Clinical OMICs March/April 2019 News Unfair Competition Law, while accusing Miller of breaching a severance pay agreement and fraudulent inducement. Alere asserted that NAT misappropriated Ionian's nucleic acid amplification technologies for its own diagnostic tests. Alere cited Galas' role as a director of NAT, which has been disclosed in filings with the U.S. Securities and Exchange Commission, and also asserted that the two men were in "regular contact" and that Galas was an investor in NAT. Galas insists the agreement was not breached, and that no wrongdoing against Alere and successor Abbott has occurred. "Abbott's theory that they used for this cross-complaint was that somehow, because of this obscure bad idea, that became somehow a trade secret of Ionian's, and that some- how that belongs to Alere and Ionian. This is nonsense," Galas countered. "It wasn't even kept as a secret in my lab, and maybe the only secret might be that it didn't work. Any- body who worked with it knew that it didn't work, and the technology was discarded. Ionian had no interest in it." In December, California Superior Court Judge Joel R. Wohlfeil denied a motion by Alere for summary judgment, ruling that the wording of the agreement by which Alere bought Ionian was vague enough to allow consideration of "parol" (also called "parole") evidence beyond the text of the contract. "The contract language is ambiguous and subject to more than one reasonable interpretation. As a result, parole evi- dence is admissible, and there remains a factual dispute," Judge Wohlfeil wrote. Two $15M Payments The Ionian-Alere acquisition agreement called for two sep- arate $15 million payments tied, respectively, to achieving milestones related to tests for influenza A test and Strep A. According to the agreement, the payments "shall be earned and payable" upon meeting conditions that included issu- ance of at least one U.S. patent from U.S. Patent Appli- cation No. 11/778,018, or a continuation having "at least one claim substantially similar in scope to claim 67 of that application." Claim 67 covered a method for amplifying a dou- ble-stranded nucleic acid target sequence "under essentially isothermal conditions, wherein amplification is performed by multiple cycles of said polymerase extending said for- ward and reverse templates along said target sequence producing a double-stranded nicking site, and said nicking enzymes nicking at said nicking sites, or amplified copies of said sites, producing an amplification product." Galas and the Ionian shareholders contended in court papers that Alere wrongfully never paid the two $15 mil- lion payments even though the company commercial- ized tests based on the Ionian-developed technology and obtained three U.S. patents based on Application No. 11/778,018, all of which have at least one claim substan- tially similar to claim 67. Two of the patents, No. 9,562,263 and No. 9,562,264, included wording that the covered technology covered a method for amplifying a double-stranded nucleic acid tar- get sequence "under conditions wherein amplification is performed by multiple cycles of said polymerase extend- ing said forward and reverse templates along said target sequence producing a double-stranded nicking enzyme site, and said nicking enzymes nicking at said nicking enzyme sites, producing an amplification product." The merger agreement was amended twice; the second amendment in 2015 added a $5 million milestone payment tied to achieving commercialization of the RSV test. Galas and the Ionian shareholders assert that Alere wrongfully delayed payment since it was not made until May 2017. For that milestone and the two larger ones, Alere has countered that Galas and the Ionian shareholders failed to meet conditions, arguing that the claims in the issued pat- ents were not substantially similar to those of Application No. 11/778,018, and were not allowed or issued by the agreement's target date of January 12, 2017 since the '263 and '264 patents were issued on February 7 of that year. Galas and sharehold- ers said they agreed to the target date based on Alere making best efforts to secure allowance of the claims. They have accused the company of foot-drag- ging, while Alere has denied wrongdoing. Abbott's ID NOW is a line of CLIA- waived, marketed diagnostics designed to detect influenza A and B, respiratory syncytial virus (RSV), and strep A. (continued from previous page)

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